Shopify Inc. (SHOP) Earnings Call Transcript & Summary

Welcome to Shopify's 2023 Investor Day. Please welcome to the stage, Head of Investor Relations, Carrie Gillard.

Hi. Welcome, everyone to Shopify's 2023 Investor Day. I'm Carrie Gillard. I'm Head of Investor Relations here at Shopify. It's wonderful to see all of you here in person and for those of you watching on the video stream. We're going to kick things off here in a moment with Tobi and Harley, but before we do, I want to direct your attention to some disclosures up on the screen. We will be making forward-looking statements during the presentation today that are based on assumptions and, therefore, subject to risks and uncertainties that could cause actual results to differ materially from those projected. We undertake no obligation to update these statements, except as required by law. You can read about those assumptions, risks and uncertainties in our filings with the U.S. and Canadian regulators. Note that any references in our presentations to 2023 estimated results are based on the midpoint of the outlook provided previously for our fourth quarter on our Q3 earnings call. Okay. Moving on. After our presentation for management, we will be concluding an interactive Q&A following the presentations. For those of you in the room, there should be a QR code in front of you, which you can scan and submit questions throughout the entire day. And for those of you online, there should be a tab where you can go and submit a question. All right. Without further ado, let's get this started. Please welcome to the stage, Tobi Lütke, our Shopify's Founder and CEO; and Harley Finkelstein, Shopify's President.

Thanks for joining, everyone. Tobi?

Good to be here.

So it's been a minute since we've done something like this in New York and yesterday, we spent the whole day together talking to merchants, and I know your second most favorite thing after talking to merchants is Investor Days. So really, really glad you're here on this. But something actually that I was thinking about as we were just in the green room, almost 9 years ago to the day -- excuse me, 9.5 years ago, 8.5 years ago. We were in New York City, taking the company public. And many of you were there, many of you, we actually met on the roadshow. But I was thinking back about some of the things we heard on the roadshow, some of the things that we thought were interesting. We didn't think they were true, but they were interesting, things like Shopify's TAM may not be big enough, Shopify may never scale in terms of throughputs. And even things like Shopify may not be able to handle big businesses. And I'm curious, from your perspective, 8.5 years later, is that still funny to you?

Well, no, it's not funny. I actually think that was maybe contribution take. I think that might actual been right. But let me get back to this. Let's look I'm going to break before for a second. I want to actually say -- and I think we're going to get together here just like because it's 8.5 years in so I feel it's hard to believe. So that I think runs to a decade. That was an opportunity to really expand the company. We have done a lot of financial calls since and given updates, but like it's really -- I think it's important everyone in a while to take it from the top because I think this is both of a moment when everyone can just separate the tactics from a strategy. Shopify is playing a very long game that's we always said we would. And we want everyone to have a really good model for how the company thinks because actually, I think that's the kind of thing that lasts. And that's the thing that people invest in, right? Like it's -- so this is a great opportunity, glad we're doing this. So I think, look, I've heard concerns of a TAM in the first time I did like race of funding and doing the roadshow. I think it's really, really fair. And I think it's actually reasonably correct. I think there is a underappreciated component there, which is like while the TAM can be changed. I think people can be right about the TAM is small for an online store business, but also like overlook that the TAM could be significantly bigger if certain conditions are met. And the question -- I think the better question there is like why was Shopify able to grow this market so significantly. And I think that's happened for because I think what a company at its best can be like all great companies are following a vision, following a mission to gain insight into the vision. And sort of a collaborative inquiry in some hypothesis all at the same time. And hypothesis is that new business formation, entrepreneurship, [indiscernible] retail are very valuable and are constrained in their demand simply due to the friction of meeting it. It is very -- it was extremely hard to build these businesses, and it was very obscure. And I think the process of simplifying it has increased the market by itself. And I think that's, like in a lot of ways in the world of software, our intuitions are not that well honed, right? Like it's for the longest time, there are only places that anyone could actually [indiscernible] about where the physical world and in the word of Adams, everything is actually a little easier at some at some point anyway. And it's hard to think about things that just grow in the sense that a digital company can. And I think that's on my mind a lot. And I think I'm pretty proud of having had the chance to kick off such a collaborative inquiry into hypothesis at some point in 2004. And like still being on this mission, trying to figure out like where does this vision lead. Like we can make it significantly easier to build businesses. Retail is very big. Internet is very big, both are growing. You can do a lot of it with partners, also all these kind of ideas that have been around. And then you are making a product that is excellent for its customers. And that's kind of a key to it, right? Like we just like the greatest thing about this business, the thing that one of the things that definitely makes me excited every morning to work on this is, we are building a product for most kickass customers imaginable, right? Like way [indiscernible] the people reaching for independence, the most entrepreneurial elements of companies they are part of. And so I think this is all kind of sort of sums together and says, "Well, if you have a company that's merchant obsessed that like pushes portability or pushes the complexity down of bidding things " And -- does this for a long time with excellent execution. The market itself just increases tremendously. And I think that's -- I mean, super good news for all of us here.

It's interesting. Do you think that makes it easier for us to be, like our mission isn't an easier mission to be on? Or is it a mission that is it's sort of easier to embrace because we're not just effectively selling something to somebody who wants to buy it. We're actually like growing this piece of the pie that is called entrepreneurship?

Yes. And I don't want to make too much hay of that [ food ] because, at the end of the day, we are putting a tool into people's toolbox. It's themselves wielding it for accomplishing their own goals, right? Like we can make it more likely that they are accomplishing these goals. And I think that's a super, super cool thing for us to be obsessed with. But it is -- we can push from behind, like this push from behind maybe we can make some businesses increasingly clear the bar that they might not have done if they would have spent their time, and confusion, no frustration or spend all the time trying to build another shopping cart or something, just like something that people have done enough times at this point. So that's good. We can help them not fail, like -- but success is base, like their failure is via partly implicated and I think we take that as a very, very seriously as a mission.

So just in terms of that mission, some of you heard this was sort of a bit of a mediator last week around Black Friday, Cyber Monday, which is like about 10 days ago at this point. So some of you heard some of these stats, BFCM [indiscernible] about over $9 billion in sales, our merchants sold in terms of GMV, 24% up from last year, 61 million consumers bought from Shopify store during that 4-day period but here's two things that I really love. 55,000 of our merchants had their best-selling day ever and over 17,000 merchants had their first sale ever on Shopify. So obviously, those are very impressive numbers and things you and I are very proud of. But I actually want to talk about what is beneath all that, Tobi. I mean, one of the things that I don't think people recognized or at least talked about was the fact that we had checked at uptime of 99.99999%. That's five 9s, which translates effectively into no checkout failures during the most important time period for our merchants. We handled like 29.7 petabytes of data, 58 million requests per minute. It seems to me that some of the infrastructure decisions that are not necessarily as widely discussed are really, really important to this mission that we're on to power commerce. Can you talk a bit about those decisions on infrastructure?

Yes. I think like BFCM is always -- sort of main -- I don't -- celebration, but because you get to celebrate others, which we love doing. We get to celebrate their successes. If you've looked at the BFCM Globe, which we put up during this time and have spotted any fireworks like around the globe. Those fireworks are launched every time someone has their first sale on it. And so this is really like we show you entire world, but we put fireworks up for the people who get started. This is like really, really fits the mission of the company. In this case, it's like also a celebration of infrastructure build out. It's hard to build software by scale. It really is. And it's -- there's a very important interplay between infrastructure work on a technical basis and feature work. Feature work is flashy. It's the things you can put into additions. It's -- you can -- it's things your customers ask you for, and like no one asked for, hey, build better infrastructure. So one thing you end up having as a lot of companies end up getting [ insights ] the steps into trouble because they're like you trying to skyscrapers on top of sand. And if you want to do this, you kind of have to drive very, very, very deep pillars into the bedrock, and you can better do that first, right? So -- like I think Shopify does the [ zick and zack ] of infrastructure to features very well probably because we think of ourselves as a very long-term company. We would love to be a long-term viable institution in the space of Internet, commerce, entrepreneurship and so on. And so I think what you sometimes observe is when we go quiet or like we are building a lot of so we are writing infrastructure, which afterward can be mined for features. This roughly works like the way your gas tank relates to a gas pedal. You need to fill the tank if you want to go fast. And so I think we are on the side now where we have built a lot of infrastructure because we understand like the problem remains so deeply at this point, and around our checkout work and our storefronts. And just like all these kind of things are coming together right now to allow us to build really, really, really great value. You'll hear more about our efforts of upmarket, enterprise and why all this is working. It's a good example of this because like again, one of us -- hypothesis, I talked about that we started with, but it is it ought to be possible to build one piece of software that is flexible enough for the needs of merchants of all sizes because the concept of having to replatform after you get to a certain size, it's sort of like equivalent back to the architecture of having to rebuild your entire house just because you want to redecorate a room. And it's a massively disruptive and not actually a sensible ask. So we want something that's extremely scalable. And the only reason I -- in the past, e-commerce providers have sort of segmented themselves into different business stratas is go-to-market value differences, cultural differences and how hard it is to build software that addresses all these things at the same time. If you're fortunate of [indiscernible] fires of allowing people to [indiscernible] reindeers and entrepreneurship in their lunch breaks as a plan B for their careers, then you are merit tested in certain parts of your software in a way that no enterprise software is. If those people after success then grow into multibillion-dollar businesses, you are merit tested there. The quality of software for [ fjords ] such fires is higher than enterprise software in general and us now addressing these areas is like really, really something we wanted to partly because a lot of our customers have grown with us. And now increasingly, people are saying, "Hey, I also understand what you're doing, and we would like to use this." Where we have been extremely successful from an infrastructure perspective along both lines has been in front ends. Like from the very beginning, people got like very much customized the front ends of templates and so on. And that was a big breakthrough in this space and why Shopify has initially been so successful as a very young company. And it took us 20 years of kind of an ambition and multiple trials of different infrastructure builds to come up with an idea for how to do this for business logic as well. You can really make Shopify front ends look anything you want. But like we sort of invited you to our view of how a business ought to be structured. And frankly, that is not a bad thing. It's not as bad a thing that sounded like we just had a particular view of our organization, taxonomy and all these kind of things, which was optimized for scalability. One thing a lot of traditional businesses have been finding out over the last, especially 10 years, is that scalability, the ability to scale fast and grow fast actually depends on the simplicity of your business. And saying no is very, very important. And what not as important in times of things for moving pre-digital more digital times where like every individual task like your wholesale strategy was implemented by a person who kind of knew all our people we are doing wholesale agreements with and could like apply whatever complex business rules to the cases. In reward of software and especially of [indiscernible] not a few like wholesaler, but like actually tens of thousands, you need software that can implement such complex ideas. And we have now built a piece of infrastructure, which is sort of uncelebrated and that's a good thing called Shopify Functions that allows the CTO office of our customers to build software and customize it and implement the most complex discounts and stacking rules and all these kind of things that are really unique to your business that implement incentive systems or community systems or just like strategies of your business in different markets and also the variables. And I think that's huge unlock for us. And now with this piece of infrastructure, we can make more and more parts of Shopify overridable, so to speak. And I think we accomplish a goal that we set for ourselves to make a software that gets everyone started that people don't duplicate all the work you are doing within the retailer is now on your mission, your differentiation, your merchandising, your strategy, your implementation, your go-to-market, your countries, your international expansion and so on and so on. And instead of redoing things, while also the things that differentiate yourself are some things you can bring to the table and teach Shopify to do, while still scaling to the size of a flash sale, which is like -- it's kind of an infrastructure's nightmare. It's almost like -- it's like -- sort of like a cloud's worst nightmare turned into a product strategy is like one of those things that most people don't expose themselves to, but it's certainly true in the case of Shopify. And so we're dealing with very, very big ones unknown, but we can. And we allow people to build software in such a way that they can do what they want with us dealing with potential downsides. And I think this is a great separation of concerns between us and our merchants.

I want to talk a bit about Tobi as sort of CEO. I've had the great honor and pleasure working for you for 14 years now. But everything you do is in your sort of CEO role really centers around mission, strategy, culture. But you and I have these conversations that are always fascinating around the difference between founder-led companies. And it seems to me that founder-led companies tend to outperform their peers. I mean, research shows this many of you have mentioned this in one-on-one meetings or group meetings with us or on earnings calls. But I'm curious from your perspective, why do you think founder-led companies are just a different breed of business? And why do you think -- what makes them different?

Yes. Well, okay, so I think it has a lot to do with vision, right? Like it's like -- there is just a different reason for why the company exists. Again, the things I'd say about collaborative inquiry into question or following a mission and vision, like a true, they are like a moat for companies that is distinct from that of a more operationally led company that like creates a plan for what we execute for the next year or beyond? And then the source of legitimacy is different in this case. With source of legitimacy that allows everyone in the company to go all in on like their work and figure out how to understand what they need to work on. In these more operational companies ends up coming from the plan. So that has upsides and downsides. The downside is very apparent in times like this, which require a lot of thinking on your feet and changing. In founder-run companies or vision-forward companies, the legitimacy actually comes from the people who have the best ability to figure -- like to translate what the mission is to the [ properties and counter ] in front of you. It is more of a process of quick decision making and decision making over multiple stake, time spends and so on. I think that helps because like this is the way I think about my leadership and taking the strategies and tactics for the business. The strategy hasn't changed, right? Like it's like entrepreneurs are super like are the engine of our economies, they require -- like it's fleeting. It's governed more by friction than policy in many ways. And reducing friction causes more of -- more consumption. It -- the tactics we use about how to make this simpler, depends not just on us and our infrastructure that I talked about earlier, but also like on the capabilities of a word, like of a software, we see AI come in and have a lot to say about how to build this kind of pieces of software. In a multiyear plan, I don't think people had ChatGPT foreseen, right? And so I think that's an important bit. I think the future really belongs to the most adaptable companies. And there are actually times where maybe that isn't actually that important. Like I think there are certain times where -- which are largely execution place, like, hey, we know what we need to do. Let's just go do it. It's an alignment and organizational planning and so on exercise. And I don't think the founder-led companies would outperform by others. I think we are now in these kind of times where there's multiple title weights coming from all directions, new technologies emerging here, new -- just like ideas everywhere. And we kind of have to take it from zero budget and we reinvent the company based on its principles over and over. And that is not possible unless you have like your founder slot is still active within the company. Again, every company has a founder, but in some cases, they involve, in some cases they aren't. If a founder is still involved, you can take a new situation coming and reinterpret this situation for the mission, potentially invalidating priors that are set many, many, many, many years ago. It acts as a defense against the sunk cost policy in a way that I think is meaningful and probably worth study. And I -- this is sort of what I'm trying to bring to the company, which is like I think our strategy almost is best part of as a function that implements a mission of a company that you rerun over all factual tools every moment. And like it spits out your next move in the same way, maybe a large language model spits out the next token and rerunning this over and over time is better than derivatively adding layers and layers and layers of decisions where the prior ones are simply going to be taken as foundational. Like being a little bit more humorous about it, like sometimes the interactive companies that are just like so doggedly in pursuit of their priors like they just do not want to think -- rethink some of the fundamental decisions that it always feels to me like the -- like a conference of a flat of society. It's like I'm sure those keynote speakers are killing it, but like the premise is wrong. So like I don't know what we're doing here, right? And like rethinking the entire thing, every once in a while is a good idea in my mind.

So the other, obviously, role that we all know that you love and really where your true passion lies, is obviously in product and I want to talk a bit about product leadership here because I know it's where you spend a big chunk of your time and frankly, all of us watch you spend a big chunk of your time there. But there are sort of two products that you have sort of developed and architected. One is the product that our merchant uses. The other is sort of the company product, sort of how we operate as a business, as a team day-to-day. And so I'd love you to talk a bit about the products that we use, internal processes, GSD, Shopify OS, like why have you -- why do you believe it's so important for you to build the product, such a great product internally for us to use as we build like the machine building the machine as it is for us to build the product for our merchants?

Yes. I think -- well.

It's really unique.

It's yes. I don't know if it's unique, it might be. I think it's working extremely well, so it's going to be very common, I think. It's -- look I started out as an engineer, I love building software. I still really, really like building software. It's been my free time on it. I realized at some point, what I actually love is building things and figuring out how to make systems better. I fundamentally believe that everything -- nothing is ideal. Everything can be improved. I think the best company in the world is like a 4 out of 10 on how good a company could be. So trying to be the first 5 out of 10 on that scale is like super valuable, a huge [indiscernible] there. And like, to me, this is fun. It's fun to rethink. Again, I'm trying very hard to not be subject to the sunk cost policies or just derivatively do things partly because very serious people tend to say that this is how something ought to be done. So on -- from first principles, how should you think about the principles of the business. Okay. So we built Shopify very large systems design challenge, all these kind of things we talk about. A company itself is about. A company itself is -- has principles, which should be debatable. There needs to be a process by which these principles can be debated. Some of these principles have HR implications, how many PMs do you want per engineer -- how many -- what does the company -- what does it look like? Like what titles exist? There's a lot of companies where titling is like this sort of shared network drive that everyone has right -- rights to. Like people just come up, like even Shopify at some point had an accounts receivable [indiscernible] I'm like -- that seems... And so like -- so I think what you try to do is like, okay, well, let's get at this system design, we happen to like have now as I think all of you know or maybe observed the Shopify when went into COVID like was different from the one that came out, like especially the executive team is literally, is a set of executives we have in common. Everyone else is new. And everyone else in the team and many of -- like who you should meet today either came from, as founders from companies Shopify acquired. Why? Because founders are very good at thinking first principle and thinking on their feet and have been responsible for people, livelihoods, payrolls at a certain point. There's a shared experience that exists amongst founders that is very, very powerful. And in times, there are a lot of exchanges like the beginning of COVID, that is an extreme premium. And people who have joined us like Jeff and Thea and [ Jess ] and others who are like excellent at their crafts, right? We are very much like everyone is very, very good at their particular job. What we are doing now is saying, okay, well, take product thinking to everything in the business. Like there's a thing called Shopify OS within the company, which is our operating system. All these principles are stated, all these like, what -- again, the titles, the levels, the groups. There is a system that can take all these principles and compute an entire model of what the company ought to look like in terms of its head count allocation, titles, payroll and salaries and so on. And then we compare that model of what comes out with the company we have and say, okay, well, the diff between those two things is the job of HR to get -- to make it closer to that. That's a totally different way of working. But it -- because it's fundamentally like every run of recreating this model starts from [ tabula rasa], just the principle stated. It also means that we can reason about changes to the business in a way that is like very, very hard to imagine without it. Like we can say, well, what would happen if we are creating a new group like this. What would happen if like we change the ratios between groups. What happens if the amount of tickets that are coming in that are handled by AI versus not AI changes significantly and how would the staffing change because all these things are inputs into such a model. That's just great engineering practices applied to the world of company building, which is something that in the process of bringing in a new team, I built a lot of excitement for because I tried to do of a more traditional thing, which is like higher experts and trust and delegate. And yes, like it sort of works, but it's not ideal. You get a good version of a thing that everyone is building, and I think that's just a lot more in the tank. So we also have unfair advantage with like a lot of engineering teams -- sorry, the executive team has engineering in their background. And that like -- there is like an end product. And so we can reason about how to bring a product to the company. I know you will hear more from Kaz and others about these kind of things. I think it's hard to kind of give a highlight really here. But like the point is the term you use, the machine that builds the machine is a very good one. It's a good way to think about the business. And it turns out, I think that if you look back in business history, just like hundreds of years, people tend to build businesses all the time. They're important and pull out of sort of whatever else is happening during the time they put lessons out. So like after the World Wars a lot of lessons are pulled out of chain-of-command into businesses and especially around the time of [ Taylor ] Factories and so on, that was very, very valuable. I think in times of more peace that followed afterwards, people pulled a lot of lessons out of sports which like I'm good to your office as well, but you're talking sports better for us all the time, right? So like you see it this way. And these are valuable. Where we are now in a business world cycle, I think it's a whole lot role weirder because you have people that are running companies now, that have experiences and backgrounds that it's just like really divergent. And like often come from totally different fields, engineering, Internet, software. Software is a positive sum word. Like it's just [indiscernible] Adams to compete to -- compete for. That alone causes differences. The way engineering problems are solved is a lot more of the model a thing that causes something called a desired state to emerge of like a company and its titles and then software that reconciles the state. Like you can think about it almost like a thermostat like you set it to whatever, that doesn't tell you that's the temperature right now. That just tells you like the thermostat is going to coordinate with a heater and HVAC to cause this to roughly be correct. But this sort of not imperative, not immediately exact kind of way of thinking is actually very normal for engineers and for the sort of non-determinate [indiscernible] being built there. and it's actually an extremely useful source of information inspiration for company building that's under explored. And I think we are in a good position to cause a lot of that to come together.

There's a sign right outside the door that says, I think you coined this from Hello World to IPO and I want to talk a bit about the products that we build for our merchants. And in particular, one of the questions that we get from a lot of people in the audience and a lot of investors generally is, how do you think about when to build something ourselves versus when to partner? One of the things I'm personally proud of I think you are too is that we've become a really good partner company. Like companies really love partner with Shopify, not just in the short run, but over the long run, some of the best companies on the planet come to us and ask for help with commerce. What are some of the principles you think about Tobi in assessing when is -- when do we have to build something ourselves versus what can we leverage working with someone else?

Yes. I think -- so what I love is companies that are very like bright line defined on what's their main quests and then like stop at nothing to cause -- like to explore it, right? Like -- and I think fundamentally, like I am subscribed to a philosophy that like sees more companies that are very clearly defined a little bit more than sort of like one conglomerate does everything. I think both of them are , I don't think either of them is right there are just different implementations. Again, in more less changing times. I think the conglomerates have just an advantage. But like in times where, like I think a lot of problems need to -- like everyone needs to rederive their mission from first principles over and over again in a changing landscape. I think main quest companies are like a little bit more advantaged. And again because I spend a lot of my formative years building software. And again -- most business executives, especially like the generation prior to ours came from maybe a manufacturing background or any -- something that involves Adams. There is a -- you are going to clock in on one side over other on the positive sum or zero-sum thinking, and you can absolutely get a full model of other side and utilize it. But there's like -- like a difference between the people who are like natives and immigrants to one side or other. I do think that -- we have like -- we've done a very good partnership with Stride very early, both companies grew like 100 -- 1,000 x market cap aside in the times since we did all of these partnerships. And we are working very well together. My favorite thing about the company from a simplicity perspective, is Shopify is especially a business model. We are 100% aligned with our merchants, right? This is -- people underestimate how much and obsessed Shopify is. And it's really, really easy for us because it's actually -- it's just not -- it's not a [indiscernible] It's just like it clarifies everything. And it works for a business model, too, because the best thing we can do for our own revenue is to get our existing customers more successful and get more customers get started and go for own growth. That's really, really beautiful. And we applied this to our theme partners and app development ecosystem. And now we are also on the same side of the tailwind. [ Incentives ] are all stacked in such a way that, them doing great work is good for us, merchants themselves sort of really enlightened self-interest really apply it at multiple factor levels like of business systems, yes. That also works really, really well between more mature companies, like we have great partnerships with Klaviyo and great partnerships have obviously Stride, of a firm company. And so I think I think that all of these have in common is like strong belief in a positive sum, strong belief that -- the business dilemma is actually not a dilemma. It's actually intelligence test. If you just corporate all the time, it's better for everyone. You get more points, right? Like so I think that's piece of the kind of things that are really, really very valuable. So we want to be very, very good partners, want to be known for being very good partners. I think we are very good partners.

I think also sometimes when we see something that our ambition of what we want to build is actually being built to someone's main quest and they're just doing it at a world-class level. And it makes sense for us to actually work with them as opposed to simply do it ourselves.

Exactly. And I think it's much better to have alliance of companies that are all like make common cause on their main quests because they all fit together beautifully.

Okay. I have to ask a topic that is on a lot of people's minds here, which is that of AI. And I -- we're really sort of leading in here, and you've heard us talk a bit about AI a little bit. But you said something that I'm just going to read the quote because I really loved it. Technological progress always arcs towards simplicity and entrepreneurs succeed more when they simplify. But now we are at the dawn of the AI era and the capabilities that are unlocked by that are unprecedented. I know that you often say that you feel we can do so much more when it comes to AI. But in particular, why do you think -- like you've told me that you think Shopify is uniquely positioned to leverage some of the stuff. I'm curious why.

Yes, I'm happy to talk about it. I'm going to -- I'm a little bit worried at this point about AI virtue signaling. It's like what is that? It is sort of like at some point, we put dotcom behind company names and they became worth more. So like I think people should have good conversations about what it will actually do or at least how to think about it in a product strategy sense rather than just doing this like Faire does sprinkle. But actually, let me explain this, like let me just give a little bit of background because again, I think what you want is like to have an idea how Shopify is playing its positional game over the long term and the as a company and then how to employ the tactics that present themselves as part of this. Well, look, next year, Shopify started like has been around for 20 years. It has overseen a lot of major sort of platform shifts. We come out of a time and people try to figure out how to build in terms of what it might look like. We've seen mobile hub and SaaS as a concept emerge and all these kind of transitions. I've also been part of -- in the '90s, sort of%[ Internet ], like first initial use cases. So like I've really seen the predominant and important transitions in computing age and I really have not seen anything like what AI is doing. It's that crazy or crazier. I think on a more practical level, sort of maybe practical that's overstating it. But like the types of software we've built on internet in 20 years, and we created huge enterprise value for this early -- very early. They are constrained by the platforms that existed. They are largely imperative. What that means is like they are like light switches, right? They are not declarative like a thermostat. A light switches like it turns on and off breaks the circuit. Shopify, like I think transcends this sort of somewhat reductionist idea in many places but like if you want to play in reductionist game, you open a Shopify account, you go to settings and what you will see is a lot of light switches. The difference between good software and bad software is how obvious the side effects are of the switches. Like if you turn on a country that you want to ship to, what happens? Is this software clear? Does it allow you to reason about the decisions you make; why? Why is that the important thing? Because there is a declarative desire in the minds of the operator. But the personal entrepreneur says, I would like to expand to Brazil. That's very clear goal. They want to do this well, but whatever that means. The best entrepreneurs have a model of what they want the company to be or the changes they want to make and an expert understanding of the software that they're utilizing and therefore, can run around the room and turn on or off the light switches to make the -- light up the room just so. If you've ever stayed in a hotel that we use one of our scene selectors, you've seen this done better, hopefully, sometimes this is actually worse. But like sometimes you say, okay, well, it's like evening time and all the curtains close and so on. It's like basically it terraforms everything it can reason about into some desired statement, okay? This is an important conversation because I think we are going to see a software transition definitely in the enterprise and SaaS space and business office space from an imperative time to a declarative time. The idea of I would like to expand into Brazil and do it well is actually an executable statement in a world where software can reason about the semantics of human language, right? By itself, this is not enough to write code, but event like [indiscernible] I can. So what are the -- what is the worth of entrepreneur where we can give everyone a like hyper competent, nonjudgmental, super, smart, perfectly, Shopify native Sidekick along the journey that who can do tasks and join the team in this sort of capacity. This is all really early, early innings because we're dealing with Gen 1. It's like the AI models we have right now related to what we want is about the same as like smoke signals to the Internet, right? Like it's just like that -- like you're going to get way better stuff here, but like even that stuff is unbelievably magical already. And so -- that's just like a lot that can be done here. And I think the consequences of this are very hard to have them right now. And I believe the benefits are going to be like accruing to the -- I think that the management teams, the strategies for companies that can, again, rederive the entire priors and like recheck all their priors every single time some new capability comes along. And I think we've already implemented a lot internally, like Shopify, like the amount of productivity we have matched unlock in so many parts of the business. This AI where like it's easier for us to run experiments and put on the dust is easier than people on your payroll than in the product, the run experiments and just look pretty magical, so yes.

Especially for entrepreneurs who effectively anything we can do to make simplify their lives means their like rate of success is that much bigger. And that's a particular sort of type of consumer of AI that could really benefit. I want to close on sort of a higher level question. You mentioned that next year, it will be 20 years since you started basically writing code, which would become Shopify. But one thing that a lot of you have heard us talk about is this idea of building a 100-year company. And I want to talk a bit about how you think about that 20 years in. We've got 80 years left to go, which is -- we've got some time there. But there's an importance baked into you -- this incredible ambitions across the whole business, starting from you, though, around building this long-term company, making long-term decisions, whether it's about profitability, why that sort of is oxygen to get there or that's about mission alignment or frankly, just the true obsession, I mean I wasn't just saying this, like we spent the day yesterday with merchants, and that's kind of our favorite thing to do. Can you talk a bit about that, this sort of 100-year mission?

Yes. I think -- I mean look -- it's hard to know. Like it's hard to say like that means this one thing. It means like our desire to build something that is a lasting institution in an important space, it's like you will -- like you look at Shopify and you see, here's the best thing that this team, this company, these entrepreneurs have built to fulfill this mission. Like it's like people have been building companies for a very long time, right? Like this is like personal agency reaching for independence is like -- just like very, very old. People want to do this for a very long time. It is -- it's something very, very innate and I think therefore, it's like -- it's an important mission, the implementation of how to do this changes quite a bit over time, right? Like again, like especially people tend to take advantage of the latest and greatest of things that might give them an advantage to do so. What it means to me also is like just like there's a couple of like -- I mean, obviously, you're not going to wind up being a 100-year company if you don't run profits. Like I'm a little bit old-fashioned in this way, maybe like I am an European, so I do think company should make money. And actually, that fits much better in the current times now than it did into the sort of 2021 energy, which we all, I think, trying desperately to forget about. And so that's a thing that looks to our favor. I think Shopify has always been like very profitable company before taking initial investments and so on. Like it's -- there's a [ sovereignty ] component that comes from profit, I think, because like is a means test, a wonderful thing about the market. I mean, I have a lot of thoughts on capitalism and that like Shopify is fundamentally, equality of [indiscernible] companies like fundamentally it sort of sits in the [indiscernible] center of enlightenment level of values of independence, merit and like these kind of things. I think the entrepreneurial process is super, super important, obviously, even like literally our core mission. But actually, I think the thing about capitalism is actually like almost unbeatable, and is actually deallocation of unproductively allocated resources. And that's a really, really important process. We certainly find that so many of our biggest customers, biggest business merchants are like attempt #4 or 5 or people who came are small group of people who came out of an existing big retailer that like maybe over-leveraged on more floor space or these kind of things. And I think that's also something to celebrate. You've got to be trim, like you have to have -- like you have to have an engine that means tests everything. Like you have the systems inside of your company, your products, your -- like everything needs to be of merit. Like Shopify does not have a strong lock-in, right? Like it's -- we are the absolute core. I think 99% of our customers on monthly plans or something, that might not be a real number. I actually don't know, but it's like most. And so they can fire us any moment, the thing that makes people stay is merit, this obviously is very good, right? And that's, I think, the most pure relationship you can have those customers. You don't want the distorting effects. So I feel like this is all important. And -- so you want to like be tested by your environment. You want to be profitable because that means you can sustain yourself and reach this level of sovereignty. And you don't want to pull future profits forward at a discount, right? Like to come -- like meet certain milestones slightly ahead or because that's valuable for people who have slightly different hierarchy stack from the long-term investors. Also, the investors are on the same side of the table. Again, this is -- it's really powerful if you just think about everyone kind of like just being like in this together. And so I think that's most of the ingredients which you utilize for this. This is how you're building a business. Like encoding the enemy of every culture is the strategy of comments and revision to the mean and all these kind of things. It's like at some point, like unless your internal culture and your systems and beliefs don't have enormous internal scaffolding for to hold them up. They will fall to the ground and the system and the company and its culture will become a hopefully, good version of what is generally believed to be part of the industry. If you want to do better than that, you have to have strong principles. And I think we are really finding more and more ways to encode some of these things into the tools, into the systems and so on to just hold -- like provide scaffolding for the long term because if you want to do better than -- this is such a simple statement, but if you want better results than what everyone else is getting you must be different probably because reversal of the sentence is simply that if you do the same, you get -- clearly, you will get the same, right? Like no -- difference might be worse or better. So like you've got -- like you take a big risk. This is why most people don't do it and say, like, "Hey, building a culture, which again is like an implementation of a general cultures are right now of companies in tech, and then we put our own brand on it. How are we actually different, right? Like that's -- then you can be -- you can see outsized success you can really be innovative, you can discover completely novel concepts. Some of them are going to be different in the bad kind. Many of them are different in a good kind if you really apply yourself and engage in good first principle thinking. And then you make a mix out of the whole thing and do you build a company and when you support with parts that you want to endure and you say goodbye to the parts of the culture of values that are not fitting into the next version you're trying to build, and you do this over time, and I think it can be self-sustaining and powerful and hold together. So that's super fun, I think, from a job perspective. Frankly and is valuable for, I think, everyone involved, and so that's what we are doing, and that's hopefully what I get to do for next 10, 20 years..

80 maybe.

Maybe, yes. Let's go.

Thank you for this. Hopefully, we'll see you again on Investor Day before 80 years from now. But thank you all for joining us for this. Tobi, thank you for being so candid and so transparent.

Thank you. Thanks -- thanks very much. All right. Thank you.

Next up, we have -- I think Glen Coates, who is going to join us. Glen is VP of Product for Core. So please welcome Glen Coates.

Good to be here. So yes, my name is Glen, I lead Core product here at Shopify and I am here to talk just about the product. It is our #1 priority. It's the reason we get out of bed in the morning. And I'm going to talk a little bit about where the product is today, how we got here, what our strategy is, for where we're taking the product in the future, but most importantly, why do merchants and developers love and default to Shopify for building their businesses. Before we go to the actual product, I want to talk a little bit about some things of where the product is today that you might not know. This thing you probably do know, we talk about this a lot. As of 2022, about 10% of all U.S. e-commerce was on Shopify. We say this all the time. And this is in the U.S. But the thing you may not know is that in Europe, we're not far behind. In 2022, about 6% of all e-commerce in Western Europe was on Shopify. That number is growing fast and catching up to the U.S. But Shopify isn't just about D2C. We launched Shopify B2B in mid-'22 and as of Q3 of '23, GMV for B2B was up double the same quarter a year prior. By August of this year, we had done as much GMV in 2023 as we did in all of the 2022. So B2B is a big business and growing fast. But of course, we are not just about online. You probably also heard us talking a lot about point of sale on earnings in the news. But what you probably don't know is how big this business is. We expect to do $450 million in revenue this year on POS, and that too is growing quickly. And the result of all of this is, of course, the household names, the world's best brands, the world's fastest-growing D2C innovators either being on Shopify already or coming to Shopify quickly. And the reason for this is the product. Brands come to Shopify for the product first and foremost. And it's not just what the product is today, which is pretty awesome, but it's also how fast the product is improving. If you've been paying attention to Shopify.com for the past couple of years, you will have noticed these things, these are the Shopify additions. We put one of these out every six months or so. And each one of these catalogs all of the features and improvements that we have brought forward in that 6-month period. And each one of them contains more than 100 improvements to the product. There'll be another one of these early next year. But this one is the one that we shipped in summer of '23. And as all of these scrolls passed and you struggle to read them all, note that each one of these updates is in many cases, the entire 6-month road map of another company, in some cases, a public company. And so yes, our business is big. It's growing fast. The world's best brands are either on Shopify or coming to Shopify and yes, we ship faster or better than anyone in the industry. But why do we build, what we build? How do we think about products? How do we think about a product strategy, different to the rest of the market? And why are we such a force in this market? I'm going to spend a few minutes now giving you an outline of five evergreen strategic pillars of how we build our product that should give you a clue as to why the best brands of today are on Shopify and why the best brands of tomorrow are going to be built on Shopify. Number one is our original strength being the easiest way to start a digital native business. Now from the beginning, this is probably the main thing that Tobi got right. Because trying to make it so easy to get started building a business online when we got into the 2000s, and millions of people thought, you know what, maybe I could actually start my own business on the Internet, maybe I could do it. A little known fact, the name Shopify actually comes from the word simplify. And so much of what we do in the product is just about that word about making things easy, making things simple, taking things like the massive servers and code and website design and shipping and taxes and payments and all that c*** and we melt into the background so that entrepreneurs can focus on the very hard job of having a product that their customers want and love. Now there are hundreds of examples of this all through the product, but I'm going to make it a little bit real for you with one actual example. And I'm going to show you how you can launch your business into a new country on Shopify in 20 seconds. So literally, just click on settings, click on markets, got a U.S.-based shop. I want to be in Canada. I say cool. Let's look at Canada, click it, boom, add it. Click add. Let's say, I want my Canadian prices to be 20% more than they are in the U.S., keep it simple, just type in 20%, click save, and my store is now literally live in Canada. The country selector appears in the right place, the prices are correct and it all just works. There's literally hundreds of examples of things like this that would take days or weeks and a team, on another platform, and that just took 20 seconds and we cannot overstate how important this kind of thing is. But if that seemed easy, and Tobi talked a little bit a second ago about imperative versus declarative interfaces, of course, we're not done yet. You may have noticed this, Tobi put out a video that got a lot of play earlier this year about Sidekick. Sidekick is the new AI assistant for Shopify that we are working on actively. And so Shopify has always had the easiest to use imperative interface. If you think about software like a car, we have the best car you can drive it where you want. We're now going into the world declarative, which is like Uber. It's like, I don't want to drive the car. I just want to tell you where I want to go. Can you please figure out how to get me there? Because I don't actually want to drive right now. Sidekick is going to be a step function change in helping entrepreneurs get started. Even if they don't know where that button is in Shopify to launch the new market or change that setting, Sidekick is going to help them do that even more easily than in the past. So why does being the easiest place to start a digital native business matters? So the first thing is literally the mission of the company, right? Lowering barriers to entry helps there be more entrepreneurs and more entrepreneurship in the world, and that really is the tide that raises all boats. But being easiest means that we are the default places that businesses start on the Internet, which means that somewhere in that million, millions of businesses that are on Shopify today, is the next Allbirds, is the next SKIMS, is the next Supreme. We don't know where they are, but they're in there somewhere. And when businesses start on Shopify, they tend to stay on Shopify as they grow up, which means that the world's leading brands of tomorrow are going to be on Shopify as well. Third thing I'll say about this is that it turns out that enterprise businesses are also full of human beings surprise, surprise. And they also appreciate having software that's really easy to use for when they want to launch that new project, that new division, that new initiative they would like to just be super easy. Speaking of scaling. Number two, is being the ideal way to sell globally in all channels. It turns out that when a business hits product to market fit, they go out into the world, they start launching new regions, new products, new team members, all of this stuff they start having real-world problems and they need help with that. And so one of the most valuable things we do for our merchants is that we solve more problems in the box than any other platform out there. And I'm going to walk you through what I think of as kind of eight dimensions of commerce. This is things where you might want to solve one problem, one way or the other. And this is the part of our strategy that I really like to think about as the how about both, right? Do you want a or b, what about both? Wouldn't it be nice to get both? And as I walk through these eight things, I want you to think about, can you name any other company that would say yes to all the stuff I'm about to walk you through. The first thing we help people with is we help them sell both online and in person with, of course, our storefronts and our point of sale, we make that super easy and these are two things that are integrated together. It's not two different systems, it's one system. And we are the only commerce platform in the market that can say yes to doing both of those things in one place. We not only -- we got the clicker out of order, pretend you can't see that. We help people sell domestically, which is where people mostly start, but then with just a click of a button, like I showed you a second ago with Markets and Markets Pro, we help businesses sell internationally as easily as they do at home. We help you do both. We help people sell to consumers and also to businesses. Again, we don't make you launch two different websites. It can be one website, which shared inventory, orders, returns, logistics. We help you do it, all from one place. Of course, the world of commerce is multichannel. So not only do we help you sell first party on your own website and your own point of sale, we help you sell third party through the social and marketplace channels that is so Core to brands reach today on the Internet. And as of earlier this year, we launched Shopify Marketplace Connect, which helps merchants get their products out on Amazon, eBay, Etsy, Walmart and other channels even easier than before because we help merchants do both first party and third party. We help merchants sell in the front office. Again, we have all of our front-office tools, online stores point of sale. But we also support merchants in the back office. Some companies will do one or the other and ERP might help you in the back office, other web companies might help you on the front office, we do both. Integrated orders, returns, fulfillments, inventory, all in one place. And of course, we help you do it not just on desktop but also on mobile. That's both for the merchant side, whether you want to run your business from desktop or you want to run it from your phone. And also for your customers, we make it easier than ever before for a brand to build a native mobile app to meet their customers where they are. We don't just give you an amazing website and an amazing checkout to convert your buyers, but we also give you integrated marketing tools as well as analytics to help you understand, well, those people that I brought to my website, why did they come, who came, what did they buy? Why did they buy? How can I bring them back? We don't just give you one side of the funnel or the other we give you both. And of course, finally, we have our core software offering, which is the admin storefronts and checkout that it powers everything, but we also -- we also pair that with Merchant Services for payments, shipping, tax and all those other crucial functions of the business to get you out there in the world. Some companies do software, some companies do services, and we do both. Now the reason this matters, why does this matter? Can't you just buy all these things individually? Why do you need them all in one place? Well, the reason is that when you're on Shopify, this isn't different problems. This isn't 16 different deployments with a bunch of integration glues holding them together. This is one1 system where each time you need a new problem solved, you just click a button and it comes on and it's one system all in one place. You know these companies, enterprises often are struggling under the weight of their own integrations. They can't adopt new technologies. They can't move fast because they're struggling under the weight of the glue that's holding everything together and they can't spend the time on the wood of the business that they wish they were focusing on. And so this is a huge part of the value that we offer to our customers is that it's everything in one place. Just reflecting on this as a consumer I think about like my AirPods, right? My AirPods, they -- the AirPods sound the best and they sound pretty good. But the thing about AirPods and the reason the will only ever use AirPods is because they connect effortlessly to my phone, my iPad, my watch, all of these things work beautifully together, and I never have to worry about how they connect. Now we solve a lot of problems in the box, but of course, we cannot solve everything in the box, which brings me to the third part of our strategy which is Shopify having the best developer platform and ecosystem in commerce. The 20% that we cannot do inside the box is met without our platform. So we start with the world's best primitives for commerce, handling those hard problems of products, customers' orders inventory in markets. We then put extensibility on that. Tobi talked a little bit about functions and the way we've extended the back end. We make these primitives extensible with metafields functions flow app, so that app developers can put their own spin on it and solve unique problems. We give them great development tools that are a pleasure to use. And then importantly, we give them the App Store and the theme store to go to market and find those merchants who will be their customers. And being a member of our developer ecosystem is basically the best choice if you're a new developer starting a business today. And the result of this is this, the 10,000-plus apps in our app store, we have the richest app ecosystem with the most solutions in it of any commerce platform on the planet. We're so proud of all of our developers and what they've built. And earlier this year, we launched this built for Shopify. This is our new program, which sets a new standard for quality and integration of apps built on the Shopify platform. And as of this program, I think, is only about 6 months old, and we are already at more than 200 apps that have met the new standard. And I think something like 10% of all app installs in Shopify stores are now certified built for Shopify, and we expect this to go up and up over time. The benefit from merchants is, of course, that these apps feel tightly integrated to Shopify in the same way as the core features of the product. It's a win for merchants. It's a win for developers, and it's a win for Shopify. The fourth part of our strategy, this really comes from the top. This comes from Tobi. I think it's worth saying that one of the structural advantages that Shopify has is that -- and I think Tobi will be a bit embarrassed by me saying this, but I think Tobi is probably one of the most Internet native human beings on the planet. I think Tobi sees the future of the Internet in 5 to 10 years more clearly than almost anyone I've ever met. It's actually nice he is here right now because it proves it is a human being and not just an IP address with a face and it's no secret that Tobi is a pretty hard marker when it comes to the quality and performance of the product we build, just ask anyone who's been through a product review and the reason that matters is this. The Shopify admin is one of the best performing, most beautiful, most joyful to use products on the planet. And the reason that matters is because our merchants spend a lot of time in this thing. They spend all day doing their work in this thing. It matters that every pixel is handcrafted, it matters that it's a joy to use because this is a big part of why merchants love and default to Shopify for their current business and their next business and the next one after that and the next one after that. But it's not just the emotional experience of using a product that's a pleasure to use. It's also performance. In commerce, performance is king. Performance is conversion, performance is dollars to the bottom line. And this is why we spent so much time on infrastructure. We have 300 points of presence around the globe, putting us within 50 millisecond of every consumer on planet. The reason we're able to achieve this is the 350 infrastructure engineers who work on this every single day so that our merchants don't have to alongside our partners at Google and Cloudflare and what does this actually add up to? Well, I'm sure you heard this number out there on the street by independent study, the Shopify checkout converts on average, 15% better than the competition. That's 15% more dollars to the bottom line. Who can say no to making 15% more money and the number of businesses where this is the difference between the business working and not is staggering. And this is why we do it because technical and design excellence actually makes people more money. Now I would love to believe that the Shopify checkout converting 15% better than anyone else is purely a result of great engineering and great design. Mean that would make us feeling really good about ourselves. But that is not the whole story, and that brings us to the fifth part of the strategy, which is Shopify through all of our fortune. We have millions of businesses on the platform. We have hundreds of millions of buyers going through every day. The billions of GMV going through the system, we take all of that scale, all of that data and we put it back into the product for the benefit of our merchants. We do this in a number of ways. The one that you're probably most familiar with is Shop Pay, the purple button that you probably click a little bit too often. Shop Pay as of a few months ago is now the #1 checkout method on Shopify. It's been more popular than all the other wallets for some time. Recently, it became more popular than guests check out with a credit card. And the reason is that it converts 10% higher on average than all the other wallets. It converts 50% higher than guest checkout. And weirdly, even just the presence of that purple button on the page, even if you don't click it, causes a 5% boost to lower funnel conversion. Other examples, Shopify audiences for merchants who are opted into sharing their data, we help them buy better ads on the Internet, in some cases, producing reductions in CAC of 50%, which is really something. Another example, Shopify Capital, because we see these businesses, we're literally helping the merchants run their businesses. We know more about the businesses than the banks can. And as a result, we can underwrite loans more effectively than the banks can, which allows us to offer a better lending product. We have a 70% renewal rate on Shopify Capital from first loan to subsequent loans, which is kind of unheard of. Now these are 3 examples. There are going to be many more of these in the future. But when you add it up, these 5 evergreen pillars of our strategy is why merchants and developers love and default to Shopify. We're the easiest place to start a business. Once you start scaling, we're going to solve more problems for you in the box than any other provider, and we've got more problems solved you out of the box through our app ecosystem than any other provider. We're going to give you a product that is fast and is a pleasure to use, and it's going to make you more money because we're putting our scale back into the product for your benefit. And this value prop is something that is irresistible. And frankly, like, doesn't -- the [ rational actor ] test is going to mean that it's kind of a bad decision to start a business anywhere other than Shopify at this point in history. That's where we got to today. This is evergreen. We've been doing this for a long time. I hope this is helpful, but this isn't really news. I want to now move forward to 2024 and a few of the key problems that we're looking at solving in the coming year that are going to help our merchants even more. The first one is large and complex products. So historically, Shopify's product data model has tended to be better suited to simple products than complex ones, and in 2024, we're solving that. So all of those products that have complex colorways, complex attributes, complex configurations, all of the very large variant counts. We are solving this problem so that merchants of all industries, all sizes, all product catalogs can represent their products on Shopify in high fidelity. And the great thing about this is it's going to increase the fidelity of Shopify's data set around all the products being sold throughout the world in independent commerce which helps us help them when they go out to Google, Facebook, Amazon, all these marketplaces to make sure that those listings on those marketplaces perform as well as they do on their own online stores. Speaking of large and complex businesses, one of the problems that we're really excited about solving for enterprise merchants is around what we call staging. And that is the process of taking products, content, data from a development environment out to production safely and in the right way. And so one of the things we're going to be helping our merchants do is have staging environments where data can be prepared, it can be seamlessly migrated over to production with just a click of a button and then scheduled to go live at the right time for that sale, for that product launch, for that new season. And this is, like everything else we do, something that is 12-fold difficult process-heavy in other software and will just be a click of a button on Shopify. Moving from enterprise to enterprise retail, something we did in 2023 was we improved the support for retail locations from up to 1,000 retail locations to make sure that we're ready for enterprise retail. And again, the best thing about Shopify is the fact that retail and the online store, they're not 2 different things, they're 1 thing. And so we want to help bring those experiences together for our enterprise retailers by making improvements to, "buy online, pick up in store," going one way and then, "buy in store, ship to home," going the other way, so that wherever those buyers meet the merchants, they have the experience they want. And not just that, but also solving the problem of split cards so that if the buyer wants to buy online, pick up in store or a mix of the 2, they have the opportunity to get the experience they want. On top of that, for international retailers, we are going to be improving support for local payouts so that each region can get -- can settle the funds the way that they need to and also support for location-specific pricing and publishing of products so that the right merchandising can be done for each retail location individually. The last thing that's really exciting about retail is we're going to be deepening our integration between Shop; see above, most popular wallet on the Internet; and the point-of-sale experience. So that when a buyer comes into the store, they're going to be able to use all of those great features of Shop like Shop Pay installments, pay with the shop app, get receipts and order tracking right there on their phones just like they do on the online stores. Again, 1 system, everything working well together. Now physical retail stores are not the only physical go-to-market that our merchants care about. In B2B, the salespeople who go out into the field and represent a brand in the market are a critical part of their go-to-market strategy. And one of the problems we're going to be solving in 2024 is improving the roles and permissions in a Shopify store so that a brand can add their in-house or contract salespeople to the account and only give them visibility to the accounts or the regions that they're supposed to be covering. Again, preventing that merchant from needing 2 different bits of software to manage the online store and the sales reps. It's just 1 thing with the permissions set correctly. And on the topic of international. So we've always had great built-in support, bundling services for payments, shipping, tax, duties, so on and so forth. But in the past, support for these services has not been evenly distributed across all countries. It's been better in some than others, North America mainly. We're making big investments in 2024 in solving this problem by creating new payments and shipping platforms that are going to allow our partners to build native integrations through the local payment providers and carriers so that no matter which country you're in, no matter which country you are launching into, you will have access to equally high-quality merchant services anywhere on Shopify. And I'll close out here with the final thing here talking about AI. I think it's actually legally required for me to talk about AI because its 2023. I think if I don't talk about this, [ Elia ], actually comes and fires me on spot. But it's okay, he'll reinstate me on Monday, so it'll be fine. I want to talk a little bit about why we're different here, right? Like everyone -- you've probably been to 1 million conferences this year where people say, "Yes, we're going to build AI into the product. It's going to be totally new and it's going to be amazing and yada, yada, yada. But everyone is working off the same base models, everyone's got the same tools, so how are we different? What are we actually doing differently? What are the structural advantages for a company like Shopify with AI? And I really think about this on 2 axes. The first is if you think about AI as an a system, maybe riding beside you in the car, who can take the wheel when you don't want to drive any more, how much that assistant can help you is fundamentally limited by how good is the actual car, right? That's why everything that I said above matters so much. That's why it matters that we solve 8 dimensions of commerce, why it mattered we have the App Store. The assistant can only help you as much as the vehicle you're riding in. And so it matters what the product capabilities are that the assistant is actually working with. Number 2 is okay, great. You're sitting in an F1 car with your assistant. The assistant wants to take the wheel, how good of a driver is the assistant? You've all probably figured out by now that in AI, data is actually king, right? The data is what matters and, see above, 10% of U.S. e-commerce, millions of stores, hundreds of millions of buyers. Shopify has a unique ability to train the world's most capable, most intelligent assistant because we have the scale. It really does come down to scale. And so that sets us up with 2 structural advantages that I'm really excited about. But I'm not going to finish talking about Sidekick. I'm going to talk about a different AI product that I think is pretty core. This is Shopify Inbox, which is something we don't talk about that much. But if you paid attention to the last addition, you'll notice this little feature that we had in early access, which is suggested replies from the AI agent to the incoming chats from the website visitors. Helping merchants answer their chats more quickly, of course, goes straight to conversion. The faster you answer the chats, the more likely the visitor is to convert, but this is just the beginning. I think we might be entering a new era of how businesses interact with their customers. And I kind of think of this as a fourth mode. Now if we go back in time, the first mode is the most traditional one, it's the retail store, where you meet your customers in person, then we move forward to mode #2, which was the website, of course, Shopify's home turf. We move forward to mode #3, which was social and marketplaces in those shared spaces where businesses met their customers. But as the world reconfigures their brain around ChatGPT and a different way of interacting with software, chat interfaces are going to become a new frontier where businesses meet their customers where they are. I like to think about, whether it's a business or a creator, could I just open up like WhatsApp or Messenger or even text and text a creator and say, "Hey, when -- are you on tour at the moment?" Get a link back to the tour dates. Is there a new album, get the link back to Spotify. "Oh, is the T-shirt from the last tour still available?" Get that link straight to check out and this is just going to be a new way that consumers go and meet the brands that they're excited about interacting with. And the great thing about Shopify is we get to solve all of these problems for our merchants. It's not all going to go there, but whether they're meeting them in store, on the website, on a marketplace, on social or in chat, Shopify has the platform that is going to allow merchants to be everywhere. Even cooler is the fact that our ad platform allows us to, not just solve the problems we know in-house, right? We know the products, the orders, the customers, all of the business rules that will allow the agent to answer these questions correctly, but we even have the app platform that would allow the apps to answer the questions that they would handle about the subscriptions, about the returns, about the loyalty programs, all of these other things that you would want to see in this experience, we have the foundations to provide. Okay. That's a little bit about where we're going in 2024. This is the strategy for why merchants love and default to Shopify. And now I'm going to hand it over to Kaz, who's going to talk a little bit about how we build the company to make all this possible.

My name is Kaz Nejatian. I'm Shopify's VP of Product and Chief Operating Officer. I helped lead our products and merchant services shop and retail and lead our support growth, operations and revenue teams. I'm here to talk to you a little bit about the company of Shopify. You've heard us say Shopify is a product company. We take great pride in being a type of company that prioritizes building products over making profits. And a little insight in the company. We actually start every executive meeting at Shopify with this slide. We say our priority is -- our priority #1, build the best product in the world and the team and the culture to support it. Priority #2, make money so we can do more of #1. And priority #3, never reverse 1 and 2. This prioritization has actually worked out extremely well for Shopify. We're almost at a $200 billion GMV run rate. We made $5.6 billion in revenue last year. We haven't really slowed down in 2023. We're going to add about $1 billion in top line this year. That's pretty good for a company of our size. But building, like Glen said people come for the product and building great products year after year, it just wasn't luck, right? It's because we, as a company, well, Tobi, specially, are really good at making product decisions. We have a long history of making good product decisions. That's why you're here. That's why I'm here. And we know the secret about making great decisions. We make great decisions from a position of strength. right? Most companies decide they want to become product companies when they realize their existing product kind of sucks. It's a really bad time to make that decision. It's really hard to turn that around. For us, this has been core to our DNA. And my job as the COO of the company, is to make sort of Shopify is operationally excellent, so that we, as a company, can make all nonproduct decisions from a position of strength also, right? I think if you can do this, we can create the same type of sustained advantage for Shopify the company that Shopify the product has had. But before I take you through why we want to build Shopify the company the way we built Shopify the product, I think it's important to talk a little bit about why Shopify as a company is different. I'm a nerd, I'm an honest to goodness nerd, so I read a lot about the history of companies. And if you read a lot about history of companies, you'll notice that Shopify is rare in the world of startups, right? We've never changed our mission. We flung the OG mission, but our TAM is growing. We haven't had to have a large pivot. What we've always known is becoming more obvious to the world. The intersection of internet and retail is really big. It's growing fast and Shopify merchants are taking ever-increasing chunk of it. You may be wondering what these bubbles are. This is the past decade of Shopify cohorts. You'll notice an interesting thing. As our cohorts age, our merchants become more successful and Shopify's revenue from the cohort increases. Shopify is an incredibly good business because of the way our product works. This is the holy grail of SaaS, negative churn in a cohort and across all cohorts. This makes Shopify unique amongst software tools. We're 1 of the only tools that grow with our users. As our merchants grow, as our GMV grows, as they become more complex, our product organically grows with them. From "hello world" to IPO, Shopify is that unique piece of software that has our merchants back, propelling them forward at every turn. I'm not sure if you all saw this book outside. There's some copies that are lying around. But we -- this a 2019 version of this book. We've given it to you mostly unedited. It's not the most recent product principles we have, but we give this to every single employee that starts with Shopify. Because every single employee at Shopify works on the product. My goal is to apply the decisions and the principles that we encoded in this book to Shopify the company. Same quality bar, same system thinking and same constraints, right? And if we do this right, to be blunt about it, Shopify will be a for-profit company that grabs more out of every dollar invested for our merchants than any company. Look, we say priority #2 is making money. But just because it's priority is #2, it doesn't mean we're bad at it. We've actually found out that when you're an operationally excellent company and have a great product, you make a lot of money. And it's our job to take that money and help increase the world's entrepreneurship pie. When it comes to building a company, being a product company means something interesting. Think of your favorite product. All good products make the important things easy and everything else possible. Some of you work at big companies, you know that most big companies make the important things incredibly difficult and make all side hustles really easy. All good products are purpose built, right? Gymshark shirt looks nothing like an [ Albert shoe ]. Almost every company within a block up here looks exactly the same as every other company, same HR rules, same sales processes, same software. We want Shopify to look different. We want it to be more like a great product for the company. We want it to do different things than most companies do. Let me tell you how this applies to my top 3 priorities as the company's COO. First, we want Shopify to be operationally excellent and have the highest talent density of any tech company. Second, we want Shopify to have the world's best growth engine, one that identifies entrepreneurs before anyone else, would have identified platform switches before anyone else and onboard them to Shopify successfully. Third, not least important, we want to make more money and generate outsized returns so we can build better products. Let's start with operations. Most companies today are modeled after the U.S. Army in World War II. And not the Army at end of the war, the one that was winning, the army at the start of the war. In fact, companies that were started last week modeled after the U.S. Army World War II. These companies are built after a thing that -- it's not just pre-software. it's pre-Turing machines, and they're very poorly optimized. Let me give you 1 example. Most companies are built around managers, the people who don't build things. Our commitment is to make Shopify a crafter's paradise, where people can deepen their skills, get recognized for their expertise. And we've pushed and are going to continue to push the company away from layers and layers of management towards a crafter's focused companies. Now look, engineering and R&D velocity are things that are, like, hard to quantify. They're, like, very subjective measures. But luckily, Shopify's leadership team is full of nerds and product people and engineers. So we kind of like know it when we see it. I'm going to share some numbers with you today. and most non-R&D metrics will lead to the same direction. So our senior engineers at Shopify are spending 22% less time in meetings than they used to. Crafter-to-crafter pair programming, building the actual product is up 40% year-over-year. The number of per requests per engineer, year-over-year is up 37% at Shopify. And the number of projects completed by product manager is up 56% year-over-year. The average product -- project at Shopify took 100 days last year. It'll take 80 days this year. This is faster, better, more. We've also reduced the average number of reporting layers at Shopify. This is important because the deeper company is, the higher the coordination tax becomes and flatter companies just tend to be faster and we want Shopify to be incredibly fast. Tobi talked a little bit this morning about these principles that we've encoded into Shopify OS, and I'll talk about them a little bit to -- in fact, I'll show you a little bit of the OS. But we do this work because we want to be different in a very key way than most other companies. At most companies, leaders are not in the details, right? If you're leading the U.S. Army at the beginning of World War II, you can't be in the details, because you can't know everything. So most companies end up developing heuristics like person with X title gets to make Y decision, which is why when companies get big, everyone becomes a Vice President. But titles are a really dumb way to determine expertise. We don't want Shopify to be governed by an org chart, so we built a piece of software. Let me show you GST. We built GST because the hardest thing to do in a large tech company is align the company on the mission, on a thing. Most big tech companies look like a bunch of people here working really, really hard, doing the exact opposite thing of a bunch of people over there. A lot of actions happening but not a bunch of movement. GST is a lightweight operating system that provides visibility on projects across Shopify, right? Everyone at Shopify works on a project. Those projects ladder up to missions. Those missions ladder up to things. This is not just in R&D, it's also in finance. It's also in operations across the whole company. All missions at Shopify are reviewed every 6 weeks. So Tobi, Glen and I get in a room and review every single mission in the company. So that means at most, any mission in the company can be 6 weeks off track. If we need to make a change, we make a change. Things that take months, quarters, years at most companies can take a maximum of 6 weeks with Shopify. Now you may ask why do we build all this custom software? Well, first, if you want to be different, you have to use different tools. But there's a more fundamental reason. Like Tesla builds cars but they spend a surprising amount of time building bespoke robots that build the cars rather than building the cars directly. We build software. We spend a lot of our time building software to build software. This has been incredibly rewarding for the company. But we're taking this further, right? Shopify OS, I'm pretty sure Tobi actually wrote this code that I'm showing on the screen. Shopify IS, yes, he's nodding. Shopify OS is a piece of software that makes Shopify's culture readable, not just by humans, but also by machines. We've codified the way the company operates into a structured database. [ Techno depo ] that allows us to leverage and do what we do best, which is, right, software, to run the company using structured data as input. In practice, this means Shopify is very odd company. And most companies, a lot of people spend lots of time on annual planning and 5-year visions. They're in a room, spend many weeks, company annual plan in December usually. And by January 3, that plan is useless because a bunch of things have changed. We at Shopify can plan for the entire company as frequently as we want. We can change a set of inputs and know immediately what the outputs will be. We can use our use our GST to prioritize the company differently, change the shape of a project, changed the size of the craft, change expertise on a team. This is usually done in Notepad or Excel sheets at most companies. At Shopify, the shape of the company is perpetually projected forward, every hour if we want it to be. So we know the consequences of every decision and the cost of every decision. Within minutes, we can know what will happen if we pull a lever. This helps us immensely in planning for the company, but it also helps people who work at Shopify. So this summer, we invested some time in automating HR tools. I know you all love HR. But usually, when you're the company and you want something to change in HR, you send an e-mail, you send a stock message or a Teams message to an actual human being, whose title is usually Talent Support Operations. Hey, I need so and so to get a raise. Hey, I need to answer how many vacation does so and so have left. I want to hire a new person in this job. We've been able to write code to reduce the number of workflows handled by talent operations by 50%. Let me give you my favorite example is we just finished an impact cycle at Shopify. During that impact cycle where we reviewed the performance of everyone in the company, 3,500 questions were asked by managers that were immediately responded by the machine. No waiting for someone to answer your question. The machine answering the question directly, removing human to human interaction and reducing the odds of mistakes. No matter where you look across the company, the business, product engineering, design, support, HR, we're finding ways to make things happen faster. People at Shopify don't waste time waiting for responses. Usually, problems like this exist in companies because an API is missing. At Shopify, we're just building the APIs. And we think that will help make Shopify have the ability to stay flat over a very, very long time. I've noted enough about this, I think. Before I keep going, let me tell you the results of what happens when you do this work. I want to tell you about why we're building the best growth engine in SaaS. But before I tell you why, I want to show you a number. This is Shopify's merchant support from 2019 on. I think most companies would look at this and say, yes, please get me some of this. It's really good. But one of my core principles is that when you're ahead, you need to do everything you can to get further ahead, and we're not happy with good. So in 2022, we turned on a bunch of growth products that we've been working on for a while, and this is the results, an inflection point you see midway through 2022, is us turning the work we had done for the product into doing it for the company. In the 12 months since we did that, we've added as many merchants at 24 months before it's combined. I'm going to show you a bunch of charts that look kind of like this. But underneath it all, I want you to remember this. What I'm showing you isn't unique because we've just gotten good at any one thing, right? That's not it. We've always been really good at building products. We're just applying those principles now to literally everything else, starting with where it began, in small merchants, but we're going to do is for everything. Whenever something is ready for growth, we have a product-based system to grow it. This is Shopify's lead funnel from 2019 on. Again, you see that inflection thing. With 25 million stores trying to enter the world of commerce using Shopify this year, not all of them are going to succeed. Many of them will. My mom is a Shopify merchant, so I am rooting for her. But I can tell you almost the certainty of the next Bombas, next Albert, next [ ATO ] is on Shopify today. They're going to become either small businesses or massive businesses, but their journey will start on Shopify. And we're doing everything we can to meet the potential. Achieving this growth, by the way, isn't just an overnight thing. It's about having a platform that we've built over many years and just activating growth. There's an odd thing about Shopify's growth team. Most companies' growth teams are actually called marketing teams, we call ours the growth team for a reason. We have engineers, product managers, designers and data people building products in our growth team. The first thing they did was build [ GRFX4 ]. The first thing they built was built products for our merchants, right? They built onboarding. They built navigation guides to help merchants succeed, to help them get onboarded faster. But once we've built those things for our merchants, we turned those engineers, designers, product managers and data people to build tools for Shopify. So we started building kind of an exoskeleton with software machines around our growth marketers, things that in most companies are done manually by people, like spend optimization, automated bidding, creating -- oh, this is one of my favorite, predicting the lifetime value of a bid in a paid search before you place that bid. So the key -- everything, software as an exoskeleton around people. So we built custom Shopify only versions of products that companies like HubSpot, Exacttarget and Marketo build for general application. We built these for ourselves, again, because our growth looks different than most companies. And because we built these tools over the last 12 months, we've been able to increase experimentation volume at Shopify by 500%. We've eliminated a lots of third-party tools and we freed our talent from the toil of doing the manual work of clicking enter into an add machine, and these investments are paying off. I can tell you that winning is fun, and our tools are allowing our growth marketers to win on a really big scale. And merchants are choosing Shopify more than any other option. This is online store Shopify against our top 5 competitors. You'll see that our share is almost doubling. And merchants just aren't choosing Shopify, they're succeeding with Shopify. One of the measures we're obsessed with, you heard Tobi talk about it, is the first sale. The second the merchant that makes their first sale, you can see that around the same time, same growth tools, allowed us to significantly increase merchants who made their first sale on Shopify. It's not also just that we're getting much better at growth and our merchants are becoming much more successful. It's -- oh, [ did I miss a slide ]? We're not good at slide ware. It's that we're finding new channels that allow us to get more efficient and better at our spend. So this is a chart that shows our spend on various channels for growth in Shopify. Most companies in SaaS are highly reliant on paid search. Over the past year, we've now developed 8 other channels. And you'll hear Jeff talk about this, this afternoon about how we're incredibly focused on the payback period per channel and doing -- spinning up 8 new channels is really, really difficult, but one that is easy to do once you built a product is to have a new channel, is whenever you need one, you can just spin one up. And this has, like, really interesting results. This is paid search on Shopify and new merchants that we've done from paid search. So you'll notice that over the past 12 months, we've reduced our paid search budget by $100 million, while merchants from this channel have dramatically grown. We're spending less money getting more merchants. And we're not taking the money we've saved in finding new channels. So we're diversifying our channel base, which is very good for defensive reasons, but it's also very good for offensive of reasons, right? Like the 8 channels I showed you are similar to the slide that Glen showed you earlier. These are channels that we have optimized in the U.S., but not much rest of the world yet. This allows us to have a runway not fall victim to classic marketing language. They say 50% of my marketing budget is working, I just don't know which 50%. I can tell you exactly which percent of Shopify's marketing budget is working. And it doesn't -- this has pushed us to work just for online store. That's plus upgrades driven by search -- by our growth team without ever talking to a salesperson. You'll notice the increase. And that chart is the retail paid pro merchants using our all-new point of sale, which honestly is closer to magic than it is to software using the same growth engine. I've shown we've done this in online store, in Plus, in all-new point-of-sale. The job now, the same thing that growth engine that we've built starting next year and attacking different funnels. Whenever a product is ready for growth, we can turn our engine on and grow it. Before moving on, I need to talk to you about attach rate. I know everyone in the room wants to know if our attach rate can go higher and if we have the levers to make it work, the answer is yes. I joined Shopify in 2019. And when I got there, the first question that people would ask me back then, I think our payment penetration rate was 40%. And the question was, can this go higher? Today, payment penetration rate is around 60%, and it has a lot of headroom to go. But the thing that's important to recognize is that payments just happens to be the oldest merchant services product we have. There isn't that much unique about it. And I say that as a guy who loves payments. The other products we have are just among the similar path, right? They're just not as old as Shopify Payments. So if you look at the last few years, you'll see this dramatic increase in our attach rate. What we're doing is just applying the same product principles to grow in payments as we have elsewhere. You're going to see the same work across a bunch of other places in Shopify. But I think the best way to actually tell you the story of how we're prioritizing support and revenue and sales of Shopify if to welcome Bobby Morrison, Shopify's Chief Revenue Officer at the stage. Bobby?

Okay. Well, thanks for hanging in there. My name is Bobby Morrison. As Kaz outlined, I'm the Chief Revenue Officer here at Shopify. I'm excited to share with you a little bit more of what we've been up to since joining the firm. Kaz walked through how millions of entrepreneurs are finding Shopify every single year, but some entrepreneurial journeys start elsewhere. And our mission is to make commerce better for everyone. So my goal today is to walk you through exactly how we're doing that in the rest of our business. A little back story. I joined Shopify back in August of last year. My charter was pretty clear to productize the commercial business in really 3 ways, up level the operating maturity of the team, build a world-class and differentiated go-to-market and 3 is to make sure we do all of those things at scale. A combination of which we think delivers operating leverage. I'll let you guys be the decision-maker on that. So without any further ado, probably the best way to look at the impact and illustrate some of the changes that we've made since joining is to just dig into the numbers. So we'll walk through some of the numbers. We'll then get into the underlying foundation and some of the transformational changes we've made. And then I'll dive into 3 key growth vectors in the business that I think are important. Some of them are surrounded by myths. Some of them we've already talked about today and hopefully wrap things up with everyone well informed. Okay. So with that, the first thing you should take away is that the changes that we've made are working. What you see listed here is lifetime revenue bookings. You should think of this as new business coming to Shopify contracted in a particular quarter over a 3-year period. And what you see is a quarter-on-quarter improvement over the last 4 quarters, and we have momentum. We're growing faster than ever before. The second thing you should take away is that we're doing it profitably. Part of up-leveling the commercial operating model of the business is instilling fiscal and operating discipline. And we're doing that by deploying new compensation and incentive models that have profitability baked into them. We're doing that by changing the shape of the commercial organization and reallocating our resources to places that we believe deliver the highest rate of outcome and performance in the marketplace. We expect this trend to continue.

And one of the things that actually probably interesting that most companies, we hold our sales team to a much -- a very interesting definition lifetime. Lifetime is 3 years for Bobby. But most companies will be really happy with that -- either of these 2 charts. What we've done is allowed Shopify's growth become more profitable in the year the contract is signed by a new merchant, which is, I think, incredibly rare in the world of SaaS.

Very good. Yes. You got it. All right. So moving forward, you probably have 2 other questions. Where is this growth coming from? And is it durable? So let's unpack those one by one. So where the growth is coming from. One of the things we look at is imports versus exports. And I don't think we've shared this data with you guys before. Imports meaning how many do we take from the competition and how many of our existing customers leave us and go to the competition. Well, let me walk you through some of those numbers broken down by segment. In the mid-market, this is a number -- this is a part of the business that we've done extremely well for a very long period of time. You would probably know it as Plus. Mid-market, we define is $2 million to $20 million in GMV. We're winning 43:1. That means we're taking 43. You laughed, so I had to laugh with you. 43 of the customers -- of customers come to us from the competition for every 1 that we lose. The number thing -- #1 takeaway is same thing that Glen said, when customers replatform to Shopify very rarely do we see them leave. As a matter of fact, we actually help them grow. And as we stretch up market, here's the other part of the story. In large, we're winning 26:1 in an enterprise; $125 million and above, we're winning 38: 1. We are absolutely disrupting the competitive environment at all 3 levels in all 3 segments in the marketplace and we're absolutely taking share. The next thing is, well, is it durable? So now I'm going to get into the underlying foundation. Now many times, you look at this kind of a slide, and this foundation sounds just like every other one. It's probably a little bit boring. But let me just tell you, our foundation's gone through a pretty big transformation. 70% of my leadership team across marketing, sales, support, operations, customer success, partner channel are brand new to their role. Each of them was particularly selected because of their ability to drive high impact at scale in the business. These are builders, not operators. It's an important distinction here at Shopify. While they bring their best practices from their prior role, what we're doing is taking that insight and we're applying it in a founder-led way that's giving us a competitive advantage in the marketplace. The second is around our culture. So everyone's talked about it. It's unique. You don't really understand it, Kaz, until you've actually been here. It took me a little while. I actually wrote a blog post about this when I first came to Shopify, I'd encourage you all to read it. First 6 months in the Job: Why Everyone Should Work at a Founder-led Company. There's a speed and innovation, a boldness about this business that I've never seen before, and I've worked for some pretty successful firms in the past and learned quite a bit. We wanted to package that superpower of what was already here and build on top of it, operating discipline, go-to-market excellence and extreme prioritization of resources to try to point that engine into the market in a unique and dynamic way, and that's exactly what we're doing. And the last is around execution. Our operating rigor, reward systems and extreme accountability is driving a different type of execution in the business than we ever have before. We are building a commercial maturity up to the scale and capability of some of our product teams. All right. So now let's move forward. Most companies, if you were going to come in and you wanted to juice the numbers, the first place you would go is you would drop dollars into marketing, you maybe would attack the funnel at a certain stage, but that's not where we decided to start. I wanted to start at the systems layer of the business. We focused on 12 key functional capabilities. Some of these were existing, some of them we had to build from scratch. All of them have a good, better, best version of themselves, and we're still early stages of getting these up to full maturity. But in most businesses, you would stop there. They're disconnected, 12 functional capabilities. We actually see these as a series of interlocked dependencies. Well, or the same thing that you saw, Kaz.

It's just that, like -- it's a secret that keeps getting out.

Let's see if I hit it again, if it comes back. If you go back, I think -- there we go. This is always fun. All right. Well, let me just tell you what it is. And then when the screen comes up with the flywheels, we'll -- I'll explain it. We see these as a series of interlock dependencies a group of 4 flywheels that when connected the right way, and we think we've done this, they actually become self-healing. They're antifragile. I'm not going to have time to walk through all of those connected flywheels with you today, but I will have an opportunity to take you through maybe one, which is the insights flywheel. And if you guys in the booth can go back a couple of slides, that would be super helpful. That would be the other way. One more. Okay. Okay. So we talked about the -- so let me just talk about the insights flywheel, in particular, I'll spend time on 1 particular component here, which is voice of customer. So lots of decisions are made, Kaz, as you know, lots of decisions made from a variety of different inputs. But there are 2 that are like the Holy Grail. One is, what are your data and analytics continue to tell you? And the second is what are you hearing from your customers? And the challenge with trying to get the voice of customer right is that it's always sourced from disparate places. In a past life, I've seen this as high as 100 different data points coming into a company, always giving you just a veneer of the customer experience, either from a product view, from a customer life cycle view, maybe it's from a support lens or a drop-down menu of the top reasons customers have called. We've now been able to solve this, and we've done it by applying AI across all transcripts in our embedded base, so that we can get real-time customer feedback fed into a single pane of glass. We started with our support groups and across our existing customer base. Over 150,000 data entry points come into this voice of customer portal. We bring that in every single week. And we combine it with data and analytics, and it catalogs and categorizes every single client engagement we have. We have our finger on the pulse and heartbeat of our customers. We have anomaly detection baked into that, and we can make key decisions in our business in real time, adjusting to what we see in the market. So let me walk through the flywheel real quick. Anomaly detected or key decision needs to be made. Voice of customer is aggregated and pulled in cross-validated and sized with data and analytics. And then maybe as an example, we would hand that off to the...

This is actually one of my favorite new tools of Shopify. I grew up in startup land and Shopify is a very big startup. They say start-ups have 2 main jobs, talk to customers and write code. And talking to customers becomes a real problem at our scale, right? Because you don't want to listen to every customer, but you want to talk to lots of customers. What this allows me to do, as a product builder, is go into, I don't know, checkout. Click a button and hear everything every Shopify customer has said about checkout summarized by AI, but be able to click deep into the actual conversation. So it's like having lots of conversations all the time. We do this at product meetings. We actually have product reviews, where someone says, "Hey, we want to solve x problem because a lot of customers feel y." Well, let's see if they actually feel that way. It allows us to be much closer to customers despite having millions of them. I think it's really, like, a power tool where Shopify engineer has more access to customer feedback than a start-up engineer does today. It's a really powerful tool in our cover.

And as we go forward, you're going to -- we're going to be able to replace that product in the COG with marketing, LND, sales play designs, anything else we want to put in because in Q1, we'll be pulling in all presale engagements into this. We'll be able to answer that question with high confidence, what are top reasons customers are buying, what are the top reasons they're not, and where do we need to make adjustments in our go-to-market engine. It's a super powerful thing. All right. So before I move on to the next section here, just to summarize, we're growing faster than ever before. We're doing it profitably. We're taking share in the market, and what we've built is starting at the systems layer, therefore, it's durable. Now we're going to pivot to 3 key growth vectors. Myths that are in the marketplace. And again, we've talked about some of these already today, but I'm going to try to poke on them a little bit more with the go-to-market lens. First is that we're just for entrepreneurs. The second, is that we're just an e-commerce company. And the third, we've talked about this quite a bit. We have a finite TAM. So let me take them one by one. All right. So we've talked about how millions of entrepreneurs are coming to Shopify every single year, small part of the business. That's the SMB side. I want to talk about the other part, mid-, large and enterprise. Jeff is going to get up in just a moment and to show you how this part of the business is becoming a disproportionate part of our growth and a bigger part of our overall revenue streams and the thing that we're really excited about as we move forward. So let's go into that in greater detail. So over the past 15 months, we've completely transformed our go-to-market motion. We've started with train -- changing our orchestration. We've shifted our marketing resources and started to point them aggressively and offensive in market. And we've built a different type of partner ecosystem on top of the one that was already existing. So I'll take these one by one starting with orchestration. So one of the things we had to determine when we were building our go-to-market and our orchestration models was how did we want to show up in the marketplace. And the very first thing that I wanted to make sure we did was we were listening to our customers, and we were meeting their needs. And our customers really told us 3 things consistently: know my business, know my technology and make an expert recommendation. Know my business means not just know my business, my company, but my industry, my landscape, my competitive environment. So the first thing we did going into '23, we aligned our business by industries. The second was know my technology, not just the technology that Shopify offers, but all the other things that it happens to interface with, the inventory management, order management systems, how data is managed across my business. So we decided to invest in our solution engineering, architects and a new professional services team so that we could surround our customers with the right technical expertise to help our biggest clients make the right decisions. And then last was make an expert recommendation. It was very clear that we wanted to up level the skilling throughout the organization. So we launched a certification program in-house, starting with our customer success, we call it merchant success at Shopify, and making sure that they were grounded deeply in the core capabilities of our product and in the road map that's coming down the road. Now in most organizations, this structure would be set up functionally, AE by vertical; solution engineering team, separate; professional service team on the outside; and customer success, someplace in the corner. The challenge with that is that you end up with a massive orchestration tax. Hand raising happens, ticketing, give me a resource for this account, a new resource for another account and it causes you to move slow. We did it different. And as a matter of fact, in that environment, it looks a whole lot like this is my version of 6-year-old soccer. You can tell I'm the go-to-market guy, not the creative guy because there's no scrolling or innovation there. But anyway, it's like 6-year-old soccer. Everyone's crowded around the ball. You may score every once in a while, but it's definitely not an effective use of resources. So what we decided to do was to actually cluster these roles by pod and there are multiple pods clustered within in each industry go-to-market motion we have. It eliminates all the orchestration tax, and we can show up with all those superpowers surrounding the customer over and over and over again. It's a little bit like an NFL football team.

It also shows that like you're from Texas, when 6-year old soccer is what other people do and NFL football is what we do.

Yes. I realize where I am, but go Cowboys. I just want to say to that out loud. So in this model, everybody has a primary, secondary and tertiary responsibility. Everybody understands that they can only be successful if the person to the right or left of them is doing their job well. All of this is orchestrated by the set of plays that we developed and launched in-market, data-driven results-backed that we put into the marketplace by geo, by segment, by customer type, by persona. We run those plays to score points. And right now, those plays are working. Okay. So let me shift then to the next part, marketing. So now we've got this well-designed set of plays that we want to run in-market, but we have to bring that attention to the marketplace as a whole. And one of the things we went out and did is we started to build a war chest of third-party affirmations to help us tell our story. These are case studies, big customer testimonials, white papers, third parties like some of that you see up here. And we wanted to make sure that it wasn't just Shopify saying that, in this case, Gartner, that we're ready to take on enterprise. We needed to prove it to these third parties. And that's exactly what we went out and did. We've established a great working relationship with Gartner. We have it with all the others. I expect some of these to come out in the coming weeks and months. But Gartner said, Shopify, you're enterprise-ready. But here's -- that's not the best part, here's the best part. We were also ranked the highest in our ability to execute. That means on time and on budget. That is a huge driver in an OpEx-compressed market for enterprise clients to make decisions. They're looking for on-time and on-budget in an industry that has historically been very, very bad at both of those things. G2 Grid says the exact same thing about Shopify's retail point-of-sale solution.

I like the ocean that's between Shopify and everyone else on the G2 Grid. Like, if Shopify is only point of sale, it's honestly just such an amazing product.

We didn't rehearse any of this. So it's interesting to see what he's going to say every time he chimes in, which is kind of cool. All right. You stack on top of this the fact that there's other third parties who have said, "Guess what, not only are you 15% better than everybody else in conversion, but you're 36% better than the one with the cloud around its name." Package all this up, and we are playing offense in the market, and you're going to see a lot more of it as we go forward. And we have some insights group that tells us that we're shaking up the competition a little bit, too. So that's always good to see. Okay. Last is partners. And I know this has come up multiple times in conversations, so I do want to make sure I spend a little bit of time on it. We have an amazing partner ecosystem. It's grounded in the devs that are in the marketplace today. And we've built, I think, one of the strongest in the industry. But as you move up market and start engaging with enterprise clients, it's very clear that you need a different type of partner ecosystem to win. So we've been hard at work doing just that. In '22, we went out and got Accenture and Deloitte. In '23, we've been working very hard to bring all these other strategic partners on board. Now here's a data point none of you have heard before. $20 billion in GMV is in pipe right now from the partners that you see listed on this board. And we've had multiple, multiple, multiple wins as a result of these relationships. We've been focused on onboarding, enablement, cross training, getting deep into technical capability. And when we show up together, we show up in a co-sell motion that is very different than anything else that we've ever done at Shopify before. This is helping to unlock doors on some of the brands that I'm getting ready to walk you through in just a minute. So here are some of the brands who have said, yes, to Shopify this year. Some of them you have seen already, some of them you haven't because they've just closed this quarter, and I'm going to touch on one a little bit later on that just closed last week. Their journeys are all different. Zulily came to us from a referral, from another enterprise client, billion brand. Suntory is a switching environment. TOMS came from one of our competitors as well as part of a campaign that we put out in the market, and we created awareness and demand. At the end of the day, well, in Gymshark and JB Hi-Fi, obviously, these have been with us for a while, but they awarded us new parts of their business that had previously been with the competition. Regardless of where the journey starts, 3 things are pretty clear that enterprise customers tell us over and over and over again. We win because of the best TCO. We win because we have the best converting platform on the planet. And we win because we future proof them with our speed of innovation. Those are critical. And in the environment we're in today, we are seeing that really resonate across some of our biggest enterprise partners and clients. So I could show you another chart. You've already seen enough of them of hockey sticks up into the right of mid-market and large and how it's performing, but I thought this might be a better view for everybody in the room. The mid-market of today is the enterprise of tomorrow. 18% of our mid-market accounts are growing at over 40% and the reason why 25% of our large accounts are growing over 40% is because we actually are now surrounding our fastest-growing hyper growth customers with increased density of technical capabilities and support to help them get to the next level of growth. That is intentional and by design and something that we deployed earlier this year. Okay. On to growth vector #2, so we're stretching up market effectively. Now we're creating new on-ramps to Shopify with our offline and B2B offering. So let me talk a little bit about off-line. So in '21, we launched the product, and we decided to test and learn and get more input by selling it directly into our embedded base, pretty much exclusively. In '22, we decided to take that organization and embed it into what we call our cross-sell or our attach teams in the business, along with some of the other products that Kaz mentioned earlier. It was very clear, though, coming in, and I spent a little bit of time in the first 90 days really getting deep into this. It was pretty clear that this motion was different than other cross-sell motions. It needed to be a stand-alone business, and we had early indicators that this business would actually be great to take to market for re-platforms. So that's exactly what we did. We pulled it out of the cross-sell team, created a dedicated group around it and went to market and started going after switchers, and it's working. 68% of the business we did in Q3 came from people who did not have Shopify as e-commerce already. That is exciting because that is a new on-ramp, a different type of customer, a nontraditionally digital native customer who's now seeking out Shopify and having the brand-new experiences with us coming through our off-line product. That now creates a new type of cross-sell for us as we go forward, and it's something we're very excited about.

This room -- I actually realized, go to Hudson Yards and try to find a store that doesn't have Shopify's point of sale. Like -- just, like, every other store will be on our all-new point-of-sale. And just, like, go to SoHo and try it. And the all-new point-of-sale is really becoming a new on-ramp for Shopify and it's just a wonderful product.

Yes. It's been fascinating. There are a couple of other things that are emerging that are new as well. So let me walk through a couple of these journeys, FIGS, SKIMS, Babylist. They were growing. The next stage of their growth was to add retail to their existing online digital-first business. Paige Denim came to us in Q1 for e-commerce, in Q3, launched retail. Buy Buy Baby, Oak + Fort and Banana Republic Home came to us for both online and offline at the exact same time, looking for what we call a unified commerce solution. More and more brands are starting to recognize that unified commerce, the collective capabilities of online and offline meshed together actually create the amazing customer experiences that they want, and we're starting to see more and more of that show up in the business. Okay. I'm going to pivot to the B2B. The left side of this, my left, your -- I guess it's your right, my left, the white part, you've already heard. What you haven't heard is some of the stories behind the brands that you see listed here. And there's one in particular I want to spend some time talking about. Just last week, we finalized and closed, [ Carrier ]. They said, yes, to Shopify. [ Carrier ] is a $4 billion GMV B2B customer. [ Carrier ] said yes to Shopify, not just because of our B2B capabilities. But they said yes to Shopify, in particular, because of our road map, and because of our speed of innovation. As they looked at all the other alternatives, including the incumbent provider, they were not satisfied with the road map and innovation that was coming out of those shops. We brought our product teams in and they did an amazing job. And this is a big shot out to Glen, who is in the room who is a part of this. Speed of innovation matters, especially in environments like B2B. Little footnote, they also took our DTC storefront, another unified commerce engagement. We're doing more and more of these types of deals and our teams are getting better and better at helping our enterprise clients see value with this amazing platform that we have called Shopify. Okay. Now we're on to growth vector #3 and myth, finite TAM. We take all of what you've seen, entrepreneurs coming on in the small space, the growth in mid-market through enterprise. Online, offline and B2B, and we wrap around them a warm blanket of services that help our customers succeed. We call these merchant solutions. These merchant services, much of what you see here listed on the screen, are exactly meant to come along our customers' side and help them just in time. As they go through various stages, they need access to capital, we have that for them. They need access to new markets, we have that for them. And so one of the ways that we make sure that we get the right products in front of our customers at the right time is really 2 things: one, we have an incubation process by which we intake new products as they launch to ensure that they're ready. And the second is AI. So maybe we can spend, Kaz, a little bit of time on this one. So this incubation team is really -- it's brand new. We just launched it about 2 quarters ago, and it was designed because it was clear, we had an opportunity to tighten up our value prop and go-to-market motions as new products, new features came down the line. Every new product that we put into the marketplace goes through this process, we validate go-to-market excellence and then we launch. It allows us to be successful and scale faster. And not too dissimilar from how product got...

It's another good product, too, right? If you arrive at a page on Shopify from somewhere else, we know that. Therefore, we show you a different type of page. The Shopify home feed is custom made for you. But most sales companies just show up and try to sell you everything, whatever sticks we'll try to sell you. That just creates an odd environment between the customer and the seller. What our incubation sales teams do now is kind of experts recommenders. They know the journey that leads to that product being needed therefore, they're much, much more efficient because they don't have to do much convincing of the customer. And this is actually an interesting thing that I think is going to actually, not matter just for cross-sell, it matters for our entire support and sales org, following the path that we follow in product, in sales.

So it's leading to the numbers you see here. Productivity is up materially year-over-year. We've also worked very hard to make sure that we build in, as I mentioned before, profitability into the compensation designs, which means we're also leading with those that are best for Shopify as well. We then overlay with this a new Copilot magic. It's one of my favorite things. And it basically takes out all the administrivia all the work that is sale, I'm putting you in the sales person's mind. All the work that a sales rep has to do to curate and figure out, is this the right customer to call or should I call this one, what should I be talking about, there's a ton of back-channel work that takes place. Copilot magic takes all of that out. It will also score your client engagements. It'll tell you what your opportunities are to get better. It'll help you address those opportunities coming out of that call and rewrite the e-mail for you back to the client. And it takes that administrivia out, so our sales teams can spend more time doing the thing we want them doing, which is talking with customers, and it's driving the improvements that you see listed on the screen. So I'm almost done. I'm just going to bring this home. We have 3 key growth vectors. All 3, we have traction and momentum in. All 3, we are just getting started. We have so much room to go, and we're excited about the opportunity we have ahead of us. With that being said, let me just revisit these last 3 things. We've transformed our business. There's an inflection point. We still have a lot of work to do. There's a good, better, best version of everything that we've put in. But I think what you can see from the results is we're growing faster than ever before. The second is we're actually taking share from the competition, and not just in the entrepreneur space, not just in mid-market, but in large and enterprise. And last but not least, our commercial model is really grounded in operating and fiscal discipline. Jeff is going to spend more time walking through that after the break. I thank you again for your time. The break, I'm not sure how long the break is, but next up will be Jeff Hoffmeister.

10 minutes? 10 minutes. We'll see you back in this room...

Back in 10 minutes.

In 10 minutes. Thanks, everyone.

Thanks, everyone. [Break]

Please welcome Jeff Hoffmeister, Shopify's CFO to the stage. Jeff, take it away.

Thanks, everyone. I appreciate your time. I'm going to try and make up a little bit of time, as we definitely want to save some time for Q&A. For a lot of you know, I've been at Shopify now roughly a year, a little bit over a year. Before that, I had an opportunity to work with Tobi, Harley and team on the IPO, going back, as we mentioned -- somebody mentioned before, roughly 8.5 years ago. And it actually sparked for me the idea of doing a little bit of a comparison of where we were at the time of IPO versus where we are now. I'm going to start with that, and then we're going to build from there. And I just need the clicker to work. Okay. All right. I'll ask the AV team is -- it's hopefully better now, is it changing on the screen down here, [ Badon ]? Thank you. All right. There we go. AV problems aside. So Tobi talked a little bit about TAM. We are now roughly -- and I'm going to dig into these numbers a little bit, 18 -- in terms of TAM, 18x where we were at the time of IPO. We have roughly 5x the number of products. We have roughly 5, in fact, more than 5 countries, 5x the number of countries that have payments. Our GMV is 50x what it was at the time of IPO. Our revenue is 50x at the time of IPO. And importantly, we've gone from double-digit negative free cash flow margins to double-digit positive free cash margins. At the time of IPO, which you thought about Shopify, you were largely thinking about us at the intersection of 3 things: small and medium merchants, online commerce and North America. And now we are essentially everywhere our commerce happens. This is irrespective of merchant size, irrespective of country, irrespective of online, off-line any channel. And this is a theme which we're going to run through my remarks here today. I guess I'll call this an investment thesis, if you will, in terms of how we think about Shopify from our vantage point. And this is, first and foremost, that we are -- and Tobi talked about this, we are an accelerant through the power of entrepreneurship and merchant success. This is critical in terms of our thinking. We've used the term merchant obsession a few times a day. This is where we start all of our thinking around products and everything else we do. And we -- because of this, are becoming the clear leader in online commerce or entrepreneurs and increasingly, all commerce overall. And as also mentioned before, when you think about how our merchants are successful, that translates into direct success for us. So we want to help our merchants do better. And as a result, Shopify itself will do better. Let's talk a little bit about TAM. I'm going to speed through this a little bit quicker, just given where we are from a timing perspective. The power of entrepreneurship. This is something, again, which is extremely important to us. We think entrepreneurs are becoming a more and more important part of society, and we are helping them be successful. We're helping them be successful because it's easier to start a business. We can help them accelerate faster. We can derisk certain parts of their business. We can let them do exploration in terms of try different channels, try different products. You do all kinds of other things on the platform. We make it easier for them to be successful. And you can see this in the data in terms of my comment that merchants becoming a larger, more important part of society. 5 million business -- this is just in the U.S., new business applications. It's a step function since what we've seen from COVID, and it's persisted now for 2 years. E-commerce is obviously the heart of what we have done historically. This looks at e-commerce penetration rates in various geographies. Glen talked about us being 6% of e-commerce in North America -- I'm sorry, in Western Europe, in the key geographies. We are 10% of e-commerce in North America. We are 4% of e-commerce in the rest of the world, excluding North America and China. And so you can see in terms of the progress we're making, we feel really good about the runway is we're 10% in North America, that's going to continue to grow and all the other geographies will try and catch up with that, which itself is a moving target. So just in e-commerce, which again is kind of the heart of what we've done historically, we have all kinds of runway. And one of the things that we've done in terms of expanding TAM is the products. As we introduce more products, we continue to expand the opportunity, but that's just one piece of it. Obviously, we get into new geographies as we get new merchandise, this continues to expand. Importantly, this is third-party data. One of the things that Tobi alluded to in the fireside chat as we think about this is just one person's definition to TAM, as we think about how we expand new markets, redefine new markets, create new markets. This is just one way to think about it. We see significant opportunity ahead. This looks at the countries where we have payments. Again, there's 23 countries where we have payments. And if you think about that as a served addressable market versus the [ $8.49 ], which Bobby had talked about not quite 50%, 48% of those geographies are ones we tackle with countries where we have payments. And that -- what I should have actually mentioned also in that prior slide, if you think about our revenues vis-a-vis those numbers, we're roughly 1% of the TAM, 2% of the SAM. Here's another way of looking at it because we're doing more and more offline and you think about commerce more broadly, and you can think about our penetration, again, 2% in North America, 0.5% globally. So significant opportunity just based on these definitions, and we actually think it's larger than this. Let's talk about our merchant sales, our merchants revenues, which obviously translates for us into our GMV and talk a little bit about GMV, and then we'll talk to Shopify's revenues and margins later. This is when you look over the last 4 years, you can back into this math, if you spend the effort on it. But if you look at the last 4 years and you think about how our merchants have done vis-a-vis e-commerce overall, it's been in each of these 4, 1.5 to 2.25x what we've seen in the markets overall. So again, we are helping our merchants be much, much more successful than -- this is focused on e-commerce and then go and look at all of retail. So all of retail has had a compound annual growth rate of 5% over each -- over this last 4-year period and our merchants have been able to grow 40%. Again, we take a lot of pride in doing everything we can to help our merchants be more successful. And our cohorts are getting larger. I'm going to do -- I'm going to talk a little bit about some cohort analysis on a GMV basis, and then I'll switch a little bit later to look at cohorts on a revenue basis. But again, going back to the time of IPO, Q1 2015, $136 million was the size of our cohort. Our merchants GMV cohort for that quarter and compare that to the most recent one, you can see 7x the size and that size has grown roughly 27% on an annual basis. Here's another one, again, based off GMV. This is something which I think we're pretty proud of. You look -- you take the cohort of when the merchants in that class joined, and you look at their growth rate from that quarter until now, and you compare those growth rates to e-commerce overall. And you can see the green dots, which are Shopify, you see the blue dots, which are all of e-commerce. Our merchants have outperformed the market 32 out of 33x. The only quarter which it didn't happen was the first quarter of pandemic. Again, we really feel strongly about being able to help merchants outperform the market overall. Our merchants have on average perform 24% in the time from when they joined the platform to now, versus the market overall at 13%. I do want to call it a little bit, you see the right side of this page, there's a big diversion, which is something we love. One of the things which we think we do a really good job of is helping merchants ramp very quickly. So they take off. We do expect there will be some reversion to what you see on the left side of the chart, but this is still after they've taken off and they continue to grow until they continue to outperform. And this, obviously, when you add these all off in terms of matching that to our GMV, noting of course, the Q4 seasonality. Making commerce borderless as possible is something in which we are working very diligently to make happen. You can see a couple of different elements here in terms of thinking about what percentage of our GMV is outside of North America, now 36%, 23 countries with payments, as I mentioned. And we have now more than 65 countries where the merchant in country in aggregate is doing more than $100 million of GMV. So A lot of -- Glen talked a lot about international. I'll talk later about some products in terms of some of their growth drivers being international. This is something where we're making a lot of progress and continuing to let merchants outside of our core markets continue to use the platform and do it very, very successfully. So now let me talk a little bit about Shopify in terms of taking some of the GMV perspectives and now let's talk to revenue and margin perspectives. This is, for us, if you start on the top left and you think about more merchant GMV, us helping our merchants be more successful, obviously brings us more merchants on platform gives us more economies of scale in order of the ability to build more products, which, of course, starts to cycle all over again, which is something which we've done a really good job at to date. And as we think about, again, the concept of aligning ourselves with our merchants, helping our merchants be more successful, our solutions, and this is one product taxonomy. Kaz has shown a chart where kind of show over time how our products have unveiled. This looks at the 4 key things that we try and do for our merchants, thrive at any stage, run and manage a business, sell wherever buyers are and discover new customers. And again, the beauty of this is that it's all on one platform. So they are self-reinforcing in terms of making the platform in total much, much more powerful for merchants. So let's talk about how -- again, we've talked about GMV cohorts before. Now let's talk about revenue cohorts. If you look at our Q1 2015 cohort and you see how that has progressed over time, that cohort has grown 3.6x its original size and has had a compound annual growth rate of 19%. And so a lot of you asked questions of us a lot of times how you think about durability of growth. How is this going to persist over time. This is just one cohort. We just started with, again, going back to the IPO analysis and how it just played out over time and then compare that to all these -- it would have been a little cumbersome to have aligned for every single quarter since we've gone public. But look at this and then just basically says for all the Q1s, how have these cohorts played out over time. Now I index this to 100%. Importantly, the cohorts continue to get larger year after year after year. But if you look at this trend, they obviously continue to perform largely along the same trend line. This most recent cohort Q1 '22 is, in fact, the one, which is off to the fastest start when you look at the colors. And again, when you take all this in the aggregate and you look how these have trended over time, they continue to perform. They continue to do really well, which, of course, adds up to the revenue growth, which you all know in terms of what we publicly disclosed. Another analysis, which we thought would be helpful is to take our products, let's break -- I'm going to break them into 4 buckets to give you a little bit of sense for the size and the growth rate for certain categories of products that we haven't talked much about up to date. Starting with subscriptions. And what you'll see here in these 2 columns, this is the growth rate over the last 4 years, a compound annual growth rate. Again, whenever we have a 2023 estimate number, it's based off the midpoint of guidance of what we gave in the last earnings call and then percentage of revenue. So subscriptions here, including Standard Plus and our retail plan have grown 30% and then roughly 1/4 of revenues. Payments has grown 50% over the last 4 years, on a compound annual growth rate basis, and it's now 60% of revenues. Importantly here, though, what I am doing is I'm lumping together third-party transaction fees, processing fees and a few things, which, over time, I think will migrate into payments. So it's appropriate to look at these in one bucket. That obviously is -- and Kaz talked about this, Glen talked about this payments as a product continues to do exceptionally well, not only in terms of the penetration rate, which we expect to see going forward, but obviously, all the different things with Shop Pay, the product itself that we're going to continue to just advance payments, which is then in comparison to what I've called now our scale products. These are products that are doing for each of them over $50 million revenue. You can see in the aggregate, they have grown 66%. They are 10% of revenue. And the beauty of the successive payments and subscriptions is it makes it a hard bar to surpass, but they are obviously climbing as a percentage of revenue. And when you look at each of these products, Glen talked a decent amount about capital in terms of the renewal rate. We're doing some interesting things on the machine learning side in order to do even better targeting for SMBs that are not yet capital users. Which we think would be great adopters. As it relates to markets, we have some strong tailwinds as it relates to cross-border work. and a bunch of other things we're doing to help merchants target specific geographies, which they should be selling, where they're not currently doing. And so we feel very good about the growth rate for our scale products. And of course, the last bucket is the emerging products. Almost all of these are ones we've introduced in the last year or 2. So it is very early days, very early days, as I made an allusion to earlier, international is going to be a key piece for these products. 71% growth rate over the last 4 years. Again, some of these are just brand new. Most of these are brand new. It's still only 5% of revenue. Importantly, when you look at the scale products and the emerging products, so roughly 15% of revenue, they are going to become a larger and larger percentage of revenue over time. And that's obviously something we feel really good about. But also, as I mentioned before, payments and subscription continues to do really, really well. But remember, payments has been around for 10 years. And these products, especially in the emerging category are relatively recent. So it's a moving target. It's great that payments continues to do so well. But obviously, as these new products continue to progress and it's going to balance out the revenue some. Offline, so Glen had mentioned that our offline business, which sometimes in the past we've talked about as our retail business is roughly $415 million in revenue for this year. That includes 3 pieces. That includes the payments which happened on the point-of-sale platform. It includes our retail plan subscriptions, and it includes a little bit of hardware. That business, our offline business is expected to grow roughly 1.5% of our other businesses this year. Kaz mentioned this, too, is that this is going to be a real growth driver for us going forward. There's a few reasons for that. One is just the technology. We've, for a long time, been the best online commerce platform. This is now the best offline commerce platform as well. We've really done a lot to increase the technology capabilities. And if you're a merchant rather than being -- if you're a merchant that sells both offline and online, rather than being in the old construct where you had a tech stack online and a tech stack offline, there's very, very compelling value proposition to go to merchants. So you can all have this in one platform all the analytics, the dashboard, everything you need is in one technology, and we continue to make it better and better. And earning -- 2 earnings calls ago, I mentioned that we've got installments capabilities move -- and again, just as one example of taking some technology that's online, making it available offline, make that even more compelling for us for us -- I'm sorry, for merchants to use our offline or point-of-sale capabilities. The Intuit partnership was also particularly interesting for us just in terms of getting a little bit more scale behind the business. The #1 reason a lot of times when we're out there and talking to merchants is just lack of complete awareness around what we're doing on point of sale and how good it is. So Intuit has helped out. Bobby talked a little bit about what he's doing in terms of go-to-market and having a dedicated effort to move this forward, are reasons why we feel really good about this business. On larger and larger margins, I'm looking here at Plus. I'm showing as obviously over time how Plus is progressed as a percentage of revenues. This is, for us, an indication of a couple of things. One, we have a lot of standard merchants that will migrate up to Plus either because as they get larger and the volumes dictate them, moving up to Plus and/or they just look at Plus and all the capabilities, things like B2B and audiences, and say, "I want to move up." In addition to, obviously, just enterprises that are maybe coming for the first time and want to use Plus. As you know, this is -- Plus is one of 3 ways, as a large merchant -- that you can come on platform, commerce components and also our headless solutions, hydrogen and oxygen other way. So again, we feel very, very strong, as you all think about, well, what are going to be some of the drivers of growth going forward. This is another key piece. Attach rate. So this gets a lot of attention, of course, the attach rate has grown consistently in the last few years. This does include, I would note, in 2022 of logistics, only because we didn't do all the pro forma of stripping out logistics. But when you do that, you still look at a growth rate, which on an annual basis is high teens each year. I've laid out 3 things here, that I think will be continued tailwinds for logistics. Obviously, payments penetration will continue to do well for all the reasons we talked about, about the success of that product that we expect to continue, the cross-selling, especially for some of the higher attach rate products. And pricing and monetization. Obviously, we did the pricing change standard this year. There will be some headwinds to it. Obviously, as we take on more merchants, there are especially high volume, large enterprises. The ratio of GMV to revenue will not be necessarily the same, as we've seen with other merchants. And international, only because of international, a lot of the countries, we just don't have the full suite of products. So it's a little bit harder to do the full cross-sell. You also will note the dip from 2019 to 2020. That obviously is a function of the pandemic and the super high ramp in GMV. So that does call to attention. Obviously, there will be periods of time. We're focused on making our merchants successful. We're focused on driving GMV. We're focused on driving revenue as well. But there would appear to times where look at the attach rate, it's not the 1:1 correlation that you expect, but we will continue to drive this going forward, and we feel good about the future. I want to talk about margins a little bit. I'm going to talk about now in a retrospective and a few slides I'll talk about in a prospective. So again, based on the midpoint of guidance, 12% free cash flow margins for the year. How did we get here? Obviously, a key piece of that is what we talked about in May, about the new size and shape of Shopify, the work we did around logistics, the work we did around headcount. This is something that we spent a lot of time on getting these free cash flow margins as a continuation of a lot of diligent work, we've been doing behind the scenes for a long time. Obviously, this goes on to a lot of the things we talked about to are just operating expense discipline. On marketing, we've talked about being really disciplined on payback periods, especially on performance marketing. We've done some things on Automation. We will continue, as we talked about on our earnings calls, leaning into on the marketing side, growth opportunities. We talked about offline. We've talked about Europe, a couple of earnings calls ago. We will continue to do that. There's also revenue scale here, but we've worked really hard to get to these margins. And we look at these margins and want to drive them higher, and we believe that we can do that. Let me give -- again extend on that theme a few longer-term perspectives. Durable growth, we think about avenues for future growth along these 5 lines. I would -- as you can see the bottom on the slide, add. We historically have been very strong in this first column, our traditional merchant base, SMBs, D2C, North America online. We've expanded recently the types and sizes and geographies of merchants, which we access. We help our merchants grow, and we do this, obviously, by helping them get more buyers on their platform and to help them drive conversion. The fourth piece is we will do additional monetization ourselves. Bobby talked a lot about the cross-sell piece as well as obviously, upgrades, which I mentioned before, when you have people go from Standard to Plus because of all the capabilities and the interesting things we can do with Plus and continued innovation. Glen talked a lot about this in terms of additions. We've got over the last 18 months, roughly, we do 100 new feature upgrades in each one of these additions. And importantly, we build these into the platform. So if you're a new merchant coming on to the platform for the first time, you get the benefit of all this good stuff in the Solution Set and allows you to do all the elegance of the Shopify Admin, which Glen did a demo of before. And Tobi talked a little bit about what we're doing on AI. When we think about the application of AI in a commerce focused way, we think we, by far, are the leaders in that. So if you look at any one of our products, you could look at Subscription Solutions and you'd say, well, how do I think about the durability of this in terms of the growth curve, how long is this going to persist? How long is this growth going to be durable? And you can say, all right, so how do I think about that for Subscription Solutions. But importantly, you shouldn't think about Subscription Solutions in isolation because then you say, "All right, well, but if I add to it payments and everything that's going on with payments that obviously extends that growth curve, it extends the applicability, durability, attractiveness of that Solution for a merchant." Then of course, what you do is you add in those 4 categories I talked about before, you have Subscriptions, you have Payments, you have Scale Products, you have Emerging Products and everything we're doing with Future Products and Shopify Magic. So in totality, you get a growth curve, which is much longer, much more durable, much more powerful than what have with an these elements of the platform as a platform together is so much more helpful in bending the curve for our merchants. We try really hard to bend the innovation curve to go back to what I said before, let's help them be more successful faster. Let's raise the ceiling in terms of how successful they can be. Let's derest certain elements of their platform let's help our merchants bend this curve. So when you look at all the cohort -- GMV cohort analysis I looked at before, there's this curve for all of e-commerce, and there's a different curve for merchants that are on the Shopify platform. Gross margin, the -- I brought this into 3 buckets in terms of the things that will be headwinds and tailwinds for gross margin. Subscription Solutions will be stable to accretive, in terms of its impact on gross margins. Payments that we talked about, will be stable to dilutive in each one of these buckets, in each one of these 3 strata, I talked a little bit about the puts and takes in the interest of time now a little bit behind. I'm not going to go into all of them. And obviously, the last one, Merchant Solutions. And I put this in the category to scale and emerging products that I talked about before, as they continue to get to be a larger percentage of revenues, as they continue to grow, as we get higher merchant adoption, and that obviously will have an impact on margins. In total, this leads us to gross margins being stable to slightly dilutive. Obviously, I'm not going to get into specific guidance, our long-term model right now as it relates to this piece, but you can -- I wanted to give you a general sense of how we think about this. A few slides ago, I talked about free cash flow margin. Let me stay on the margin piece here. You compare to where we were in Q3 of 2019. To this most recent quarter, we've taken operating expenses from 65% of our revenues to 45% of revenues. Again, this is a multiyear effort of everything we've been trying to do to be very disciplined on the cost side. We are going to continue that discipline. I talked before about the things that got us here, including the new size and shape of Shopify and let's now then look at some of the drivers of future operating leverage, we will continue to be disciplined on headcount. We spent a lot of time. We did a lot of analysis. We put a lot of thought into getting to the size and shape of Shopify. That is not something which we are just going to "simply undue." We will be very mindful of adding head count in key geographies. But overall, we're going to -- geographies and areas of expertise. But we are not going to ramp this back up again. That's -- we work too hard to get to this point. On marketing, and I talked about this before in terms of some of the payback periods, like performance marketing, in particular, we've been really disciplined on this. We look at payback periods, cash spends a lot of time on this Kaz, Bobby and I coordinated on making sure, as we think about payback periods for different geographies, different products, different categories, what should those be? How do we enforce those and how do we make sure overall from a marketing spend? We're leaning into growth, but we're being thoughtful. Of course, we expect to continue to grow our revenues and deliver those economies of scale and have the operating leverage driven by AI. We really strongly believe that off this operating expense base, we can continue to grow revenues and we'll have a sublinear relation between operating expenses versus revenues overall. And again, as we look at this and we think about margins ahead, and we think we have a very powerful ability to continue the top line growth rate and also continue to improve our margins. Let me go back to this. And again, I wanted to go through this quickly. At the time of IPO, we were the intersection of these 3 sections. And now we are any merchant type, almost any geography and as we think about almost any channel. So let me leave you with 5 key takeaways. I won't read through all these. I'll let you do that. But this is how we think about the opportunity ahead. We think we have a company which is essentially operating on all cylinders. And with that, what I'm going to do is go to Q&A. Tobi, Harley and I will come up on stage. You should have all been submitting your questions. If you want to submit additional ones, fire away, but I think we have a queue.

By the way when we met Hoffmeister, he wasn't wearing cool sneakers. This is 1 year into Shopify. We love it. Take that Morgan Stanley.

Okay. We're going to get started with Q&A. Please to be online. We're just going to kind of run through as many as we can and a little bit of time we have left here. So the first question comes in from Colin Sebastian, says, Shopify has done an amazing job showing the scalability of Ruby. As we think about how you continue to scale up R&D and tap newer areas around Jet AI, are you confident that the existing tech stack in underlying technology can handle this growth? Or will there be more significant retooling of technology required?

That's for Jeff?

Yes. I'm very confident in the technological foundation of a company. And it is set up to be flexible for us to do everything, we think is plausibly needed on top. And we have a technical expertise and willingness to invest in infrastructure to make up the difference, wherever it might be needed. But like I think I made this point earlier. Like I see -- I find strategy as we -- I had my analogy to just to be quite good about how to develop a game, like I was clear people taught like at least in Germany, you've got -- you studied opening books, which is actually sort of analogous to how most people learn about business as well and to memorize them, instead now these days, I think what kids are being taught in the spaces like to develop a bot in such a way that you have strategic influence of other important parts and learn to recognize tactics, which then allow you to go ahead. Shopify has been exceptionally good. I think that the position of the game. Technical infrastructure as part of the strategic technical positioning on the bot, gaining influence, tactics like I what we wait for. This is what we build the capacity for.

Awesome. Next question comes from Mark Zgutowicz. Talk a little bit about Shop App. So the Shop App user base and it's incremental monetization that is driving to merchants. What more can we do in the near term to drive additional monetization of these users?

I'll start there. So first of all, I mean the Shop App remember, there's 2 sides to it, right? First, you have the merchant side of it, one of the things that we are seeing, actually, one of the merchants Tobi and I met with yesterday, sort of talking about that, one of their new main core channels for growth is actually the Shop App, but not just because they're finding new customers there that otherwise would not have known about the particular brand, but also the quality of those customers have a higher AOV and a higher return rate. So from a quality perspective, one of the things that you've heard us talk about sort of the surfaces of commerce being everywhere. I think we see shop at being one of those new surfaces that is an own surface, meaning you have to be on Shopify to use it, but those customers belong to the merchants, which is really exciting. On the Consumer side, is really as this morning, one of you in the room mentioned that you did your holiday shopping off the Shop App. I think one of the things we can do is -- and you're seeing a lot of progress here, whether it's shopped at AI, which some of you have played with already, which is our AI-powered shopping assistant or even in terms of how we do things like merchandising and categories and promotions. You're seeing now some of your favorite brands do drops directly on the Shop App. You're seeing brands are using Shop App, things like promotions, Shop campaigns, Shop Cash. So I think on both sides of the Shop App model, you were seeing a lot of value there. It's still -- I mean, I know you've heard this a couple of times today, but it's still quite early for Shop App. I mean we've been working on this now for a couple of years. Every single quarter, you're seeing it get better and better. But the reason we like it so much is because it's one way for us to help our merchants find more customers, and we like the idea that consumers are finding new brands that they're going to be loyal to for the long run on the Shop App too.

Thanks. Okay. Next question comes from Siti Panigrahi. As merchants sell in Shopify and other marketplaces like Amazon and marketplaces help bring traffic for merchants, how do you plan to help merchants bring traffic to their Shopify stores?

Look, if we want to qualify to be the retail operating system, you qualify the first time, then you have to requalify every subsequent year to be there -- the heart of their business. In order to do that, it has to be that wherever they're going to sell, find consumers, engage with those consumers, we have to enable. One of the mental models we've often used is you have a browser with lots of tabs. And by removing or condensing and collapsing those tabs into Shopify, where they're able to run the entirety of their business and sell across every single channel is really, really important. Obviously, we're doing things that are going to help -- that are helping merchants find new consumers and new customers for their products. One, of course, we talk to the Shop App, but also things like audiences, whereby we actually, over time, can help them make better decisions, can better target customers, increase the ROAS, which is becoming obviously increasingly competitive. So I don't think we'll ever be in a position where we're just going to give customers to the merchant. That's not the point, right? We're not giving people fish. We're teaching them out of fish. But in terms of making sure that every single surface area on the Internet and offline is integrated into Shopify that they can sell across the surface, wherever consumers might be spending their time is very, very important to us. This is the reason why you see us do things even with Buy with Prime, for example. We want to requalify every year to be the center of their business. And to do that, you have to integrate every single surface area.

And there's a lot of intrinsic motivation for merchants to want to bring people to their online stores because just like margin profile is better. And a lot of LTV is driven by mailing less, which the point people that they're on in stores and by retargeting and activities like this where, but [indiscernible] end of these activities.

All right. I want to shift a little. I guess one question in terms of payments penetration. You talked about it being able to go higher. This one is from Daniel Chan. What do you think the upper bound of payments penetration is?

I'll start. Yes, we haven't given a specific upper bound on it. We -- in fact, almost all the speakers today talked about all the opportunity we see ahead with payments. And part of it just continuing to make the product better, continuing to do more in terms of geographies, what we're doing on Shop Pay. So we believe that we have a lot of runway left on penetration, and that's just a percentage, as it relates to revenue overall coming from payments, especially as we do more with off-line, I talked about the $450 million, which we had given. That includes the off-line payments. It's a phenomenal growth engine for us. It will continue to be. We talked about other products that we hope to over time become a larger percentage of revenues, as they just eclipsed a payments growth rate, but we still feel very, very good about where our payments is going.

Remember, also, as we tie more of these incredible new solutions to Shopify Payments, things like Shopify Capital, things like audience and Shop Pay. Shopify Payments on its own is an incredible product with incredible pricing that is highly competitive across the entire payments market. When you start layering on all these other things you get but it requires you to be on Shopify Payments, it's this natural incentivization to actually adopt or shift to it. You don't want to lose out on this amazing piece of functionality because you're not using Shopify Payments. So I think geographically speaking, it's one component to, but the other one is the more products and features we add that are linked to Shopify Payments, the more we increase our penetration.

Yes. I mean think one of the craziest stats we share today is like when -- that checkouts that have a purple button, convert 5% better no matter what you use.

Even if you don't use it.

Like I said, it's -- there's really good reason for wanting to be on Shopify Payments.

And in a similar vein, this one comes from Colin, around payments, specifically and kind of how you think about build versus partner, right? We talked a little bit about this earlier, but obviously, we have a great partner in payments. But how do you think about build versus partner going forward in terms of the products that we may make next?

Yes, I can start. It's -- I don't think this is an area which lends itself to a principle that you then like doggedly follow. I think this take it one decision at a time. I think every decision will be -- every time we look at these opportunities, we will find -- we will look at the mission of the businesses and see like how much the venn diagrams overlap over like what our main quests are, like if it's main crest aligned, then it's probably a better buy. If it's fellow travelers on -- it focuses on its own sort of layer or area within and then we can combine and sort from better together than I think we are doing partnerships very well. And I think, it's hard to say exactly what the sort of totally clean, single sentence description office will be. I think it's just kind of a every situation is slightly differently, and we fall on sound decision-making principles to make the best choices. I don't -- there's no ambition to want to own every bit of pieces look in the retail stack. I think it's much to large space for doing this.

Yes. I mean if you think about some of the major products that have deep embedded partnership, for example, you take Markets Pro, for example, we were able to get the market much faster with an incredible product with our partner globally. Obviously, stripe on payments with buy now, pay later Shop Pay Installments, we were able to get to market faster with a firm. We've done this really well with a couple of key -- to Tobi's point, a couple of key partners who we've deeply embedded, but whose main Quest is that particular thing. Now also remember from a merchant perspective, merchants are using Shop Pay Installments, they're using Markets Pro. They're using Shopify Payments. So we do reserve the right to have flexibility and optionality on our side, but it allows us to do the go-to-market to get there faster with a great product and not waste time.

Yes, then you sign up for a first shop first use Shopify, and its default is not set correctly like as into whatever it should be, like whatever makes it this simplest. We consider it as a bug, and we want to be able to set defaults well. And, so like this is where we set deeper partnerships we are forging with some of the companies really, really have us because it allows us to Shopify Payments amongst the 700, whatever payment gateways we are supporting. We just have a higher quality, deeper relationship with a company behind it and so we are looking for similar implementations in these spaces.

Great. Next one comes from [ Anuk Day ]. What did you learn from taking price on standard this year? Does it increase or decrease your appetite to do the same outside of standard?

I mean, I think that was the first time we increased pricing, since I got to Shopify, like 14 years ago. We went from $29 to $39. It was a 33% increase. We didn't see much pushback from our merchants. It did -- I mean, Shopify generally, whether it's the enterprise or basic or point of sale, is kind of the best deal in the industry? I mean, when you think about a price-to-value ratio, it's so far on the side of value. We like that. We like it to be more valuable, and we want it to be almost too good to go from a pricing perspective. But it did obviously provide us with the proof point that there are other areas that we could increase the price. Where the ratio remains on the side of value, where we're still very competitive, but we're able to increase the monthly fee. I would say, in particular, with enterprise I mean you saw Bobby so eloquently present this, I think, we're taking real market share from all the major players. And one of the reasons that they're coming to us, of course, is because our product is really great. But another reason they're coming to us is because of TCO, total cost of ownership. And at some point, it becomes a bad idea or a bad decision inside these very large brands to not use Shopify, not just for basic but across all those different plans.

We want to maintain the situation there like to Harley's point, Shopify, especially in the early days that people who are experimenting or their price sensitive remains being one of the best possible deals you will ever find. Our -- the shape of the way we are running trials now has changed significantly. This created capacity for us to change a little bit about the pricing. I wouldn't expect that in core to recur. We've built up a lot of goodwill to make this change. We got very, very little pushback because everyone realized business like been excellent deal to begin with is excellent deal in the particular way, we implemented it with keeping your costs static at the annual price was also deeply appreciated. And that's the Shopify core. It's like we will probably experiment more on upmarket side because there's just like more experimentation potential there. And so I think that's the way to think about it.

Okay. Next one comes. sorry, I'm off here a little bit. There we go. Next one comes from Andrew Boone. Jeff talking about capital allocation strategy going forward and how this changes as profitability potentially ramps into the future?

Yes. We have roughly $5 billion in cash, as you know, right now, with the convert, which is a little bit under $1 billion, we're roughly $4 billion in cash, that we have on the balance sheet right now. We do expect to continue to grow free cash flow, as I mentioned in my remarks. We also recognize that we're in -- the environment that we're in -- the macroeconomic environment that we're in is we do want to have a little bit of cushion. So we do want to continue -- we're a growth company. We want to continue to lean into investments, whether it's investments on AI, whether it's investment just in general and product development, whether it's investments on anything or marketing -- anything that will help us continue to grow. That's where we will focus. So I don't see us doing the dividend any time soon to be frank about it. But from our vantage point right now, we're just going to continue to use that cash to continue to grow the business.

And this is probably going to be the last question, but we'll see if we can squeeze one more in. It's from Alex Sagrado Rock. In large enterprises, these accounts can be very apprehensive about switching or ripping out existing solutions. Do you see that changing? Or will this be pretty gradual with Enterprises taking components over time? Or are the large accounts already ripping and replacing?

It's a great question. I mean that is the case. The Sunk cost fallacy is legitimate at these large enterprises, not just that -- I mean a migration is not an easy thing. And most merchants and brands know that. The thing that I think has changed is that in this sort of, I don't know, whatever macro climate you want to call this, there is a lot of focus on total cost of ownership and a lot of focus on future proof. So what CTOs are being asked for is why are we spending so much? Why do we have 200 engineers that's sort of in the homegrown situation? Or why can't we cross-sell on Instagram or TikTok, that feels like table stakes in 2023. In both cases, on the total cost of ownership side and also on the future proofing side. I mean Bobby and I met a very, very large brand recently. And at the end of the conversation, I basically said, I think this is the last time we ever going to have to migrate when you come to Shopify. That's what a lot of these companies are looking to do right now. They're looking to modernize their stack. They don't want to keep migrating every 5 years, but they also don't want to be locked into a platform where they feel like the thing has not moved in the case of Demandware a decade. So I think it is getting easier for us. But the other thing that is happening, and this is where -- the Gartner stuff may on its own team, not that big of a deal. But when you start aggregating the Gartner stuff and the SI relationships and the new types of products bring for enterprise, and the total cost of ownership, and the future proofing, and making all these things available, you get to a point where -- again, you really have to think as to why you're not coming to Shopify Enterprise. One of the thing I just want to say, Alex, to you on the enterprise side is remember, if you just go back, 2 years ago or so, there was 1 on-ramp -- I guess 2 on-rams into enterprise. One was upgrades and the other one with Shopify Plus. What we've now had is we have a bunch of new on-ramps into enterprise. For example, CCS is an opportunity for us to have conversations merchants and brands, who may not be otherwise ready to come full on to Shopify, maybe to start with checkout, maybe to start with inventory, they start with analytics. And eventually, they decide over entirely, things like head list and hydrogen is one other on-ramp. So all these different on-ramps that didn't exist 2 years ago, those are opportunities for us to actually talk to these large retailers, and it's working.

And that's -- we're going to wrap it now. Thank you guys so much for joining us. Thank you.

Thank you so much.

Thank you.

Thank you for joining us today for Shopify's Investor Day. Have a great rest of your day.